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Taking a Long-term View

Borealis Taking a Long-term View

by Jan-Martin Nufer, Director of Treasury & Funding, Borealis

We established our new funding and banking strategy in Borealis 2007, with the aim of creating a diverse and robust finance portfolio. This was the start of a journey on which we have been travelling ever since, with the aim of achieving the ‘ideal’ funding portfolio, which in reality, doesn’t have a final end point. Minimisation of funding costs alone is, in my view, not a strategy or long-term vision. As a result, cost reduction is only one factor amongst other, more important parameters, in building a solid funding backbone. Over the past eight years, we have concluded a suite of financing transactions exceeding EUR 5bn in value, including a series of ‘firsts’, marking a major ramp up in the sophistication and precision in our approach to funding.

Credit characteristics

Borealis is an unrated corporation in the petrochemicals, polyolefins and base chemicals, sector, with business cyclicality typical of the industry. We have two shareholders: International Petroleum Investment Company (IPIC) of Abu Dhabi (64%) with the remaining 36% held by OMV Aktiengesellschaft, one of Austria’s largest listed industrial companies, with both upstream and downstream oil and gas activities. Borealis operates various joint ventures, by far the most important being Borouge, a company co-owned together with ADNOC, the national oil company of Abu Dhabi.

Borealis has historically been a ‘story credit’. Due to our business profile and the unique characteristics of our combined European and Middle East production capacities, it is not easy to do a standard credit assessment using the traditional ratios and peer comparisons, which are already difficult in our sector. This combination of factors means that our corporate profile is not as obviously clear to investors as those of publicly-owned businesses with more regular cash flow and straightforward income statements. However, once our business profile has been explained, we achieve implied credit ratings well above the industry average. In the context of selecting of the most appropriate instruments, this also means that making direct contact with potential investors and financing institutions is key for the selection of the best funding avenue.