Methanex Gives OK to Geismar 3 Project

Canada’s Methanex has agreed to go ahead with its Geismar 3 methanol project on its own. The board of directors gave a unanimous final investment decision on the 1.8 million t/y plant to be built in Louisiana, USA, adjacent to the existing Geismar 1 and Geismar 2 facilities.

The decision follows a fallout earlier this year with major shareholder M&G Investments, which said that going solo on the project would represent an unacceptable financial risk and one that was too large for Methanex to bear alone.

However, the companies settled their dispute in April, with Methanex president and CEO John Floren agreeing to retain an independent advisor to review Geismar 3’s proposed funding. Floren said the independent review was “rigorous” and concluded that Methanex had a “robust” financing plan.

“Compared to a standalone US Gulf greenfield plant, this project benefits from substantial capital and operating cost advantages, and we expect it will deliver outstanding returns,” said Floren, although he added that the company will continue to pursue a strategic partner, as has been its stated preference.

Construction on Geismar 3 is anticipated to begin later this year with operations targeted to start in the second half of 2022.  The company estimates the cost of the project at $1.3- 1.4 billion, including around $60 million spent to date.

Methanex confirmed it has arranged committed financing with a new five-year $800 million construction facility, also renewing its existing $300 million revolving credit facility to provide further liquidity. Both facilities have been arranged with a syndicate of banks and will expire in July 2024.

In addition, Methanex expects to access the debt capital markets during the second half of 2019 to pre-fund roughly $250 million of Geismar 3’s 2020 expenditures and to repay its $350 million aggregate principal amount of bonds due in December 2019.

According to Floren, the long-term outlook for the methanol industry is very positive. He commented: “Demand forecasts for methanol are strong and new capacity additions will be needed to meet expected demand growth.”

According to market researcher Mordor Intelligence, the global methanol market is expected to expand at a compound annual growth rate of 5.64% in the period 2019-2024. One of the major drivers is growing demand for methanol-based fuel, while formaldehyde is also expected to see increasing applications in the construction, automotive and personal care industries.