Yuhuang Chemical, a wholly owned subsidiary of Shandong Yuhuang Chemical Company, has closed a US$800 million project financing deal for its greenfield Yuhuang methanol complex in Louisiana, with a syndicate of Chinese banks led by Bank of China (BoC), New York Branch.

This is the first time that a construction-phase project in the United States has been debt financed by a syndicate composed entirely of Chinese banks. It is also the first project financing for a private sector entity led by Bank of China in the United States.

Global trade flows in petrochemical products are set to change as a result of a large increase in planned production capacity from North America. As one of the world's largest importers of methanol, China is re-positioning itself in these new supply chains. Though a large portion of supply from the new Yuhuang plant is expected to be distributed locally, the balance will be exported, primarily to Europe and China.

On January 9 Yuhuang Chemical began construction work on the greenfield US$1.85 billion methanol manufacturing complex located in St. James Parish in Louisiana. The project is currently scheduled to be completed and to start distributing methanol by truck, rail, barge and ocean vessels during the fourth quarter of 2019.

The project is a methane-to-methanol plant designed to produce 1.8 million metric tonnes per year of commercial grade methanol. The site is situated in an area with excellent infrastructure, and access to natural gas supplies. The Mississippi River, the Union Pacific Railroad System, and Highway 3127 will connect the plant to major interstate channels, fostering the efficient production and distribution of methanol.

The first phase of the project is a US$1.5 billion methanol manufacturing complex. Two more phases are set to follow. Methanol is used as both a fuel and fuel additive, and as a chemical feedstock for the manufacture of many consumer goods.

The company selected Air Liquide Global E&C Solutions, the United States engineering and construction arm of Air Liquide Group, a French multinational company, as the engineer for the plant.

Mandated lead arrangers on the project loan are BoC Shandong Branch, China Exim and the Heze Branch of Evergrowing Bank. Evergrowing Bank has its headquarters in the city of Yantai, Shandong Province.

“Bank of China is committed to fostering a strong partnership among United States and Chinese banks and sponsors. We look forward to continuing to support the development of large, important infrastructure projects in the United States”, commented Chen Xu, president and CEO of BoC, USA.

Yuhuang was represented in its construction contracts and financing by its corporate counsel, Bradley Murchison Kelly & Shea LLC, and its finance counsel Bracewell LLP. BoC and the lenders were represented by White & Case LLP and Jones Walker LLP. Nexant serves as independent engineer for the project.

Photo courtesy of Yuhuang Chemical Inc.