By Ludwig Burger
(Reuters) – BASF said on Thursday it would borrow 40 billion yuan ($5.55 billion) from Chinese banks to fund a major expansion in the southern city of Zhanjiang, taking advantage of low interest rates in the country.
The Zhanjiang chemical complex, which will cost BASF up to 10 billion euros ($10.91 billion) to build, is one of BASF’s two largest investments projects, the other being a global network for the production of car battery materials.
The German chemicals giant has pursued the Chinese venture, to be run entirely on renewable energy, amid heightened concerns in the German government over economic dependence on a Chinese trade partner under increasingly authoritarian rule and amid rising tensions in U.S-Chinese relations.
BASF’s 40 billion yuan syndicated bank term loan facility, with a maturity of 15 years, is part of a plan to finance the new site with about 20% equity and 80% debt.
BASF has argued that it depends too much on Europe with its slow economic growth, accounting for 39% of 2022 group sales, and that it needs to boost Asia’s share, which was 25% last year.
($1 = 7.2111 Chinese yuan renminbi)
($1 = 0.9168 euros)
(Additional reporting by Linda Pasquini; Editing by Miranda Murray)
