Dow wins $2.2 bn in damages from Kuwait's Petrochemical Industries
07 May 2013
Dow Chemical Co today said it has received $2.2 billion in damages from Petrochemical Industries Co (PIC) after the International Court of Arbitration ordered Kuwait's state-run company to pay $2.48 billion for cancelling a planned equal joint venture in 2008.
''Receipt of this award enables Dow to accelerate actions that are in line with our stated priorities for uses of cash – foremost of which is paying down debt and remunerating shareholders,'' said Andrew Liveris, Dow's chairman and CEO.
In May 2012, the arbitrator had awarded Dow Chemical a partial payment of $2.16 billion, but added another $318 million in March 2013 as interest and costs, increasing the full and final payment to $2.48 billion. (See: Dow Chemicals wins $2.48 bn arbitration award over scrapped Kuwait JV)
Dow today said that the $2.2 billion received reflects the full damages awarded by the International Chamber of Commerce, as well as recovery of its costs, but the Michigan-based company did not explain the $28 million difference.
In late 2008, Dow and PIC agreed to set up a $17.4 billion JV to be known as K-Dow. Under the deal, Dow was to transfer its basic plastics business and other assets into the venture, in exchange for about $9 billion in cash.
The JV was to manufacture polyethylene (PE), polypropylene (PP), and polycarbonate using related licensing and catalyst technologies. PE and PP comprise more than half of global polymer demand.
But the deal had not gone down well with some Kuwaiti lawmakers who said the project was not economically viable in view of the global financial crisis and slumping petrochemical sales.
Criticism of the deal also increased after officials disclosed that commissions worth $850 million were assigned to certain groups that supported the deal.
In December 2008, the Kuwait Supreme Petroleum Council (SPC) ordered PIC to pull out of the JV, which came as a rude shock to then cash-strapped Dow since it had planned to use the $9 billion from the planned deal to fund its $15.4 billion acquisition of specialty chemicals company Rohm & Haas.
In one of the several international deals that were aborted during the global recession, the Dow-PIC JV was scrapped less than a week before the deal was to become effective.
Kuwait was then reeling under slump in oil prices, which had plunged to less than $40 a barrel in November 2008 compared to the record $147 in July that year.
Dow Chemical said it would sue Kuwait for over $2.5 billion for pulling out of the agreed JV, but later agreed to allow the International Court of Arbitration adjudicate the issue.
Dow has been in Kuwait for 40 years and still has three other operating joint ventures with PIC, including ME Global, EQUATE and Kuwait Olefins Co.