Methanex announces FID on Geismar Methanol 3 plant

Methanex Corporation announced that its Board of Directors reached a unanimous final investment decision to construct a 1.8 million ton methanol plant in Geismar, Louisiana adjacent to its existing Geismar 1 and Geismar 2 facilities. Construction on the Geismar 3 plant will begin later this year and operations are targeted in the second half of 2022. The cost of the project is expected to be between US$1.3-$1.4 billion including costs of approximately US$60 million incurred to date.

The project will join two existing methanol plants in Geismar and represent a cumulative investment of more than $2.5 billion for methanol facilities in Ascension Parish, south of Baton Rouge. Through the project, Methanex will create 62 new direct jobs, with an average annual salary of $80,000, plus benefits. Louisiana Economic Development estimates the project will result in another 301 new indirect jobs.

The Company has a robust and flexible financing plan for the Geismar 3 project. We have arranged committed financing for the project with a new five-year US$800 million construction facility and for the renewal of our existing US$300 million revolving credit facility, which replaces the Company’s existing revolving facility, to provide further liquidity. Both facilities have been arranged with a syndicate of banks and will expire in July 2024. In addition, the Company expects to access the debt capital markets during the second half of 2019 to pre-fund approximately US$250 million of the Geismar 3 2020 expenditures and to repay the Company’s US$350 million aggregate principal amount of bonds due in December 2019.

John Floren, President & CEO of Methanex, commented, “We are extremely pleased to move forward with the Geismar 3 project which we believe will create significant long-term value for shareholders.  Compared to a standalone US Gulf greenfield plant, this project benefits from substantial capital and operating cost advantages, and we expect will deliver outstanding returns. We believe we are well positioned to complete this project as we have a rigorous and well-defined execution plan, an experienced team in place and a strong balance sheet and financial flexibility to execute the project safely across a wide range of prices. As we have stated previously, we have a preference to have a strategic partner for the project and we will continue to pursue that option.”

Mr. Floren added, “As part of the cooperation agreement we reached with M&G Investments earlier this year, we retained an independent financial advisory firm to advise and support the Audit, Finance and Risk Committee of the Board in reviewing the Company’s financing plan for the Geismar 3 project. The independent financial advisory firm was one of the three firms agreed to by both parties in the cooperation agreement. The independent review was rigorous and the report, which was reviewed in detail with the Audit, Finance and Risk Committee and shared with the full Board as part of their review of the Geismar 3 project, concluded that we have a robust financing plan.”

Mr. Floren concluded, “Our long-term outlook for the methanol industry is very positive. Demand forecasts for methanol are strong and new capacity additions will be needed to meet expected demand growth. We have a long track record of making disciplined capital investments to enhance our leadership position while maintaining a strong balance sheet and returning excess cash to shareholders. Geismar 3 is an exceptional opportunity to deliver on our long-term strategy to enhance our position as the methanol industry leader.”

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