Feasibility study on the proposed Polystyrene plant in KSA

The Client

The Client is the distribution arm of a Europe-based investment Company servicing the MENA region since 2013. The main activity of the Client includes Petrochemical trading, master planning and distribution of different types of petrochemical products produced across the region.

Background and Business Requirements

The Parent Company in Europe is planning to establish a Polystyrene plant in the Kingdom of Saudi Arabia for manufacturing EPS (Expanded Polystyrene), HIPS (High Impact Polystyrene) and GPPS (General Purpose Polystyrene). The total investment value is USD $330 million – of which 50% is funded by the Saudi Investment Development Fund, 25% through debt financing, and 25% through equity contribution. The Management requires a Feasibility Study to be conducted for the purpose of submitting the same to SIDF and the Financing Bank for sourcing funds for the project.

The Engagement

Affility had been approached by the Management to assist them in the decision to establish the proposed facility and to assess the financial viability of the project. The engagement scope of work covered the following:

• Market Assessment: Analysis conducted to evaluate the market potential, and market growth anticipated.
• Financial Viability Analysis: Analysis of the key financial parameters including profitability, Break-Even Analysis, ROI and IRR.
• Location Analysis: Identifying and recommending the most appropriate location for setting up the production facility based on various factors evaluated.

The Deliverable

Feasibility Study Report covering:

• Demand-supply analysis
• Financial projections (15 years)
• Most appropriate location for establishing the plant

The Result

We were able to complete the engagement within 7 weeks from the date of signing. We sourced our market data from various market research reports and government institutions in the region to assess the demand-supply GAP for Polystyrene products in the region. In order to identify in detail the production and distribution costs, we had continuous sessions with the client’s technical team to understand the manufacturing process and raw materials and consumables used.

On submission of our Feasibility Study report, the client received their in-principle approval from SIDF agreeing to fund 50% of the total investment with a moratorium of 2 years and a repayment period of 15 years at 0% interest.