PGPIC, Japan Company Sign $341m Usance LC

PGPIC signed a similar agreement with Japan’s Marubeni in September.
PGPIC signed a similar agreement with Japan’s Marubeni in September.

Japan's Itochu Corporation signed a deal on Saturday to lend €320 million ($341 million) to the Persian Gulf Petrochemical Industry Company (PGPIC) for infrastructure development.

The agreement was signed by PGPIC executive director Adel Nejad-Salim and top officials from Itochu Corp and the Japanese Embassy in Tehran, state news agency IRNA reported without naming the Japanese officials.

Nejad-Salim pointed to the presence of Japanese companies in Iran and said, "We are happy that Itochu Corp has decided to expand collaboration in Iran. We have a huge capacity for production of petrochemicals, polyethylene in particular."

According to published reports, PGPIC has been seeking foreign investment of up to €1 billion with short- and mid-term payment periods following the lifting of international financial and trade restrictions against Tehran in January.

According to the news agency, PGPIC will receive the loan under a financing method known as usance letter of credit. 

A usance LC usually includes a date of repayment that is no more than six months from the date the LC is issued, making the letter of credit a useful financial tool for meeting short-term investments.

Itochu Corp is Japan's second-largest general trading company after Mitsubishi Corporation. It is active in industries such as energy, chemicals, machinery, metals, minerals, food and textiles with annual revenues of $145 billion.

PGPIC is Iran's largest petrochemical company with over 60 subsidiaries, owning more than 11% of Iran's capital market. Its exports are estimated at $8-9 billion per year. According to published reports, PGPIC is the second biggest petrochemical exporter in the Middle East.

Japanese conglomerate Marubeni Corporation reportedly signed a similar financing agreement with the PGPIC in September. Nippon Export and Investment Insurance (NEXI), Japan's state export credit agency, will reportedly provide insurance for the loan.

Petrochem Plans

Tehran is making efforts to triple annual petrochemical production capacity from the present 65 million tons to more than 180 million tons in a decade by opening up the sector to foreign investors. Japanese companies have been proactive in expanding their role in Iran's energy market.

In October, state-owned National Petrochemical Company signed a memorandum of understanding with Japan's Sojitz Corporation to establish a methanol-to-propylene plant in Iran.

Yokohama-based Chiyoda Corporation signed a preliminary agreement earlier this year to carry out major repair works at the Bandar Abbas Refinery in the south.

JX Nippon Oil & Energy Company is in talks over supplying technology and equipment to increase Tabriz Refinery’s efficiency and cut its mazut output.

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