Dow Chemical Co., the largest U.S. chemical maker by sales, will get $2.48 billion from Petrochemical Industries Co. of Kuwait for a canceled joint venture, an arbitration panel ruled.
The ruling comes after Petrochemical Industries, a unit of state-owned Kuwait Petroleum Corp., canceled a contract to form K-Dow, a 50-50 venture with Dow’s plastics unit, in December 2008. The arbitration panel of the International Chamber of Commerce added interest and costs to last year’s $2.16 billion award for a final total of $2.48 billion, Midland, Michigan-based Dow said in a statement today.
“Payment of these damages of nearly $2.5 billion will allow Dow to accelerate its priority uses for cash by further strengthening our balance sheet,” Andrew N. Liveris, Dow chairman and chief executive officer, said in the statement. “The Dow team fully expects, and we are resolved to ensure, that PIC honors its contractual commitments in a timely manner.”
Dow said interest will continue to accrue until payment is received. Petrochemical Industries said yesterday it was waiting for the final award and direction from the Kuwaiti government before issuing the payment.
“This is a ministerial issue,” Petrochemical Industries Chairwoman and Managing Director Maha Mulla Hussein said in a phone interview yesterday. “We didn’t receive any direction from the ministerial committee. We’re waiting for any direction.”
Petrochemical Industries canceled a contract to form the joint venture under pressure from Kuwaiti lawmakers. The failure of the venture deprived Dow of a $9 billion payment during the financial crisis, almost derailed its 2009 purchase of Rohm & Haas Co. and prompted the company’s first dividend cut.
Kuwait’s parliament has demanded an investigation into why the contract was canceled. Lawmakers last month moved a submission to question Oil Minister Hani Hussein on five issues, including the contract with Dow.
“Kuwait has to pay every cent of it, including the bank interest rate since 2009,” Kamel Al-Harami, a Kuwait-based independent oil analyst said by phone. “There is no ambiguity. Whatever Kuwait is doing internally is irrelevant.”
Dow, which along with Petrochemical Industries holds a stake in Kuwait-based Equate Petrochemical Co., reported fourth-quarter earnings that missed analysts’ estimates as sales fell in Europe and Chinese growth slowed. Dow’s board last month approved a program to buy back as much as $1.5 billion of shares.