International law firm CMS has provided comprehensive advice on the financing of Police Polymers, the largest project in Poland implemented under the project finance formula and also the largest investment in the chemical industry in Poland and CEE.
CMS lawyers supported Grupa Azoty in obtaining financing for the new investment. The process of obtaining the financing, which has taken over 2 years, reached another milestone last week when the financial closing was confirmed.
Despite the difficulties caused by the COVID-19 pandemic, the investment is continuing uninterrupted and the plant is expected to be commissioned in the first half of 2023. When the new plant is constructed, Police Polymers’ production capacity will reach 437,000 tonnes per year and, as a result, Poland has a chance to become one of the European leaders in polypropylene production. An offshore gas terminal is also being built as part of the investment, to ensure an independent supply of raw materials to the new plant.
The CMS team supported the Police Polymers Project on the following milestones in the investment process:
- An EPC contract and amendments to licence agreements relating to the technologies to be used in the newly built manufacturing facility in Police.
- Investment agreements ensuring equity financing for the Project (provided by Grupa Azoty Hyundai Engineering Co., Ltd., Korea Overseas Infrastructure and Urban Development (KIND) and Grupa Lotos).
- A package of agreements to raise debt financing for the Project from a consortium of 11 international and Polish financial institutions: PKO BP S.A., Bank Pekao S.A., Bank Gospodarstwa Krajowego, Alior Bank S.A., PZU S.A., Bank Ochrony Środowiska S.A., Santander Bank Polska S.A., BNP Paribas Bank Polska S.A., European Bank for Reconstruction and Development, mBank S.A. and Industrial and Commercial Bank of China (Europe) S.A. Branch in Poland.
“Project finance is the most sophisticated formula for implementing investment projects. It requires that lawyers have an interdisciplinary legal knowledge and in-depth understanding of the sector in which the project is carried out. It also demands that they think outside-the-box to solve problems in an unconventional way, and that they are resistant to the stress associated with conducting a large number of decision-making or negotiation processes simultaneously”, says Jakub Wieczorek, partner in the CMS Banking and Finance team.
"The Police Polymers project was extremely difficult due to the separate sourcing of technology and EPC contractors, the lack of a completion guarantee, and the acceptance by the financing parties of market risks. As the market leader, we are currently working on the largest and most challenging financing cases in Poland and CEE. In parallel with the Police Polymers project, we are closing another very demanding project finance investment - a PPP project in Olsztyn - and we have further challenges ahead of us with another large project finance in the petrochemical industry,” says Marcin Bejm, partner heading the CMS Energy and Infrastructure Projects practice.
The Banking and Finance and Energy and Infrastructure Projects teams advised on obtaining project finance. The finance team was led by partners Michał Mężykowski and Jakub Wieczorek and the project team was led by partner Marcin Bejm, and supported by Michał Andruszkiewicz (counsel), Jan Radziuk (senior associate), Hubert Wiśniewski, (senior associate), and lawyers Paweł Ura, Wojciech Szopiński, Anis Ben Amer, Piotr Gałązka, Szymon Klimkowski and Magdalena Kahan from the Energy and Infrastructure Projects team. In addition, Marek Trzos-Rastawiecki (counsel), Monika Kowara (senior associate), and lawyers Roksana Pietrzak, Wanesa Choptiany, Magdalena Gajewska from the Banking and Finance team also worked on the project.
Additionally, CMS partner Lidia Dziurzyńska-Leipert from the Real Estate and Construction team, supported by Jagoda Guzik, Tomasz Minkiewicz, as well as Piotr Ciołkowski from the Energy and Infrastructure Projects team, were all involved in the project. Piotr Nowicki (counsel) and lawyers Justyna Kuta and Maciej Brezdeń advised on tax issues.
CMS lawyers also assisted Grupa Azoty Zakłady Chemiczne "Police" S.A. in the public offering process. The capital raised in this way– which amounted to PLN 501 million, net of issue costs – was also used to finance the Police Polymers project.