25/06/2018 08:04 AST

Saudi Arabia's Advanced Petrochemical Company signed an agreement with South Korea's PolyMirae through its subsidiary to set up a $420 million (Dh1.54 billion) polypropylene plant through a joint venture.

The Saudi firm's South Korean chemical outfit is itself a joint venture in which it owns 30 per cent through its investment company, along with South Korea's SK Gas and Kuwait's Petrochemical Industries Company.

The cost of the 400,000-tonne capacity project is expected to be financed by the partners through 60 per cent of commercial debt while the rest will be funded via equity contributions, Advanced Petrochemical said in a statement on Sunday to Saudi Stock Exchange, where its shares are traded. SK Advanced will hold 49.99 per cent ownership of the South Korean JV project, it said.

South Korea is Asia's fourth-largest economy and one of the top importer of Middle East crude. The country is also active in development of petchems projects in the Arabian Gulf.

The JV expects to break ground on the project in January 2019, subject to final investment decision. Propylene, the main feedstock for the chemicals scheme will be secured from SK Advanced on a long-term basis, the Saudi company said. Such an off-take was an "important" term to forming the joint venture agreement, it added.

The companies said the " financial impact" of the agreement between the partners is expected after the scheme commences commercial operations in 2021.

SK Advanced has been operating a 600,000-tonne capacity propane de-hydrogenation plant since 2016 in South Korea. PolyMirae is one of the country's leading polypropylene producers and operates four production lines, with a collective capacity of 700,000 tonnes per annum.

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