Octal Secures US$296 Million for Next Phase of Expansion

The completion of its second phase of expansion later this year will put the company well on the way to achieving US$1.5 billion in annual sales by 2012, as it converts new packaging applications in PET sheet including those for yoghurt, meat and cheese.

1/20/2011 --- Global PET packaging leader Octal is on track to complete the second phase of its operational expansion this year following a new round of funding from six Middle Eastern banks.

The privately owned, Oman-based manufacturer opened a 400,000 metric ton (m/t) PET resins and sheet packaging facility in the southeast port city of Salalah in January 2009.

Phase two of the complex, which will be commissioned from June 2012, will add an additional 527,000 m/t of production, making Octal the world’s largest producer of PET resins on one site and the largest PET manufacturer in the world. Octal has secured a RO 114 million (US$296 million) senior term loan from a group comprising Bank Muscat, Bank Dhofar, National Bank of Oman, Bank Sohar, Ahli Bank and Qatar National Bank.

Existing shareholders Muscat Overseas and Oman & Emirates Investment Holding Company have also agreed a junior debt facility of US$15 million.

The new investment was officially announced at a signing ceremony with the participating banks in Muscat.

Addressing attending dignitaries and media, Octal Chairman Sheikh Saad Suhail Bahwan, said: “This is another landmark for Octal and a proud moment for Oman. In less than five years, we have established a world-scale manufacturing complex and export operation in the Sultanate serving more than 40 countries, generating diversified growth for the local economy, and making a significant contribution to the development of Salalah Free Zone and the Port of Salalah.

“On behalf of Octal and its shareholders, I would like to thank our lenders for their support of our growth strategy. I would also like to thank the government authorities for their backing and to express our gratitude towards His Majesty Sultan Qaboos Bin Said for his vision and guidance.”

BankMuscat is a partner in the rapidly growing PET resins and sheet packaging producer, already Oman’s largest non-oil exporter, and Oman-based private and institutional investors make up a third of the company’s shareholders.

Abdul Razak Ali Issa, Chief Executive of BankMuscat, said: “BankMuscat has been associated with Octal since its inception. It gives us immense pleasure to see an Omani company become genuine world player in its industry. The expansion project of Octal is one of the few to have achieved financial close in 2010, not only in Oman but in the GCC region. The success completion of this transaction shows the ability of Oman and Omani companies to raise large amounts of financing in this difficult period.”

Worth an estimated US$433 billion, packaging is one of the world’s largest industries. Packaging for food and beverages accounts for nearly two thirds of the global market. Well positioned to serve India and China and supply established consumer markets in Europe and North America, Octal is predicting dramatic sales growth this year and next.

Nicholas P. Barakat, Managing Director of Octal, said: “Despite the challenges of the global downturn, Octal has delivered on its promises and raised nearly US$400 million in 2009 and 2010. The fact that the region’s financial community is again investing in our business reflects their confidence in our operations and ability to realise ambitious growth. Securing project finance for a privately owned project of this scale is largely unprecedented in Oman. We are proud to have on board leading private and institutional investors from Oman and around the region.”

Octal set itself a target in early 2009 of US$500 million in annual exports. The completion of its second phase of expansion later this year will put the company well on the way to achieving US$1.5 billion in annual sales by 2012, as it converts new packaging applications in PET sheet including those for yoghurt, meat and cheese.”

Barakat said: “Octal is already the world’s largest producer of PET sheet. Phase two will make us the biggest manufacturer of PET resin on a single site anywhere in the world. Octal doubled its earnings in 2010 and we expect to do so again this year. By replacing all of Oman’s PET imports, we are also generating significant additional cash flow for the local economy.”

Octal is also creating local jobs through training opportunities for Omanis in polymer engineering and hands-on work experience. A third of its workforce is made up of Omanis and more local hires are planned this year.