(Updates with Dow share buyback in 8th paragraph.)
March 4 (Bloomberg) -- Petrochemical Industries Co. said it’s waiting for a directive from Kuwait’s government on compensation to Dow Chemical Co. after the U.S. company said it expected to receive $2.5 billion for a canceled joint venture.
“This is a ministerial issue,” Petrochemical Industries Chairwoman and Managing Director Maha Mulla Hussein said yesterday by phone when asked about the payment to Midland, Michigan-based Dow. “We didn’t receive any direction from the ministerial committee. We’re waiting for any direction.”
Dow is awaiting payment after Petrochemical Industries, a unit of state-owned Kuwait Petroleum Corp., canceled a 2008 agreement to buy a stake in Dow’s plastics business. A final award, increasing the payment to $2.5 billion with interest and costs, should be released in February, Dow said Jan. 31.
“We don’t have the final award yet,” Hussein said.
Petrochemical Industries, under pressure from Kuwaiti lawmakers, canceled a contract to form a 50-50 venture with Dow’s plastics unit in December 2008. The failure of the so- called K-Dow 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’s board last month approved a program to buy back as much as $1.5 billion of shares. The largest U.S. chemical maker by sales may purchase the shares in open market or privately negotiated transactions, it said.
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.
--Editors: Shaji Mathew, Dale Crofts