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Chandra Asri secures USD1.7 bln investment for 2nd petrochemical complex in Indonesia in a move to expand its production capacity

August 03/2021

MOSCOW (MRC) -- PT Chandra Asri Petrochemical Tbk (CAP), Indonesiaís largest integrated petrochemical company, has selected Thai Oil Public Company Limited (Thaioil), the flagship refiner of PTT Public Company Limited (PTT), as its chosen Strategic Investor after a robust selection process, according to Indian CHEMICAL News.

CAP and Thaioil have signed definitive agreements to proceed with a capital increase in CAP via a Pre-Emptive Rights Issue, to be filed with the Financial Services Authority of Indonesia (OJK). The investment in CAP will be made via Thaioilís designated subsidiary that will act as the standby buyer to underwrite a successful transaction.
CAPís major shareholders, Barito Pacific and SCG Chemicals Co., Ltd. (SCG Chemicals), fully support this corporate action to inject equity into CAP. The net proceeds raised will be used for the development and construction of CAPís second world-scale integrated petrochemical complex by its subsidiary, PT Chandra Asri Perkasa (CAP 2) which will comprise, among others, of a cracker unit, polymerized olefins and related facilities and utilities. This is in line with the CAPís strategy to expand its production capacity and business scale to serve the needs of the Indonesian market.
The total estimated investment from Thaioil obtaining a 15% shareholding stake in CAP after the rights issue, and SCG Chemicals retaining approximately 30.57% of its shareholding stake in CAP, is up to USD1.3 billion. The transaction is still subject to requisite regulatory approvals, including from the OJK and is expected to complete no later than 30 September 2021. It will be one of the largest rights issue ever done on the Indonesia Stock Exchange (IDX).
Subject to a successful Final Investment Decision (FID) on CAP 2 targeted for 2022, Thaioil and SCG Chemicals may further collectively invest up to USD0.4 billion. The methods of the subsequent investment will be determined by the parties at a later stage and remain subject to the approval of CAP shareholders and relevant governmental authorities in the Republic of Indonesia.
Erwin Ciputra, President Director and Chief Executive Officer of Chandra Asri, says: ďThis is an exceptional moment for Chandra Asri. The proceeds from the rights issue will significantly boost our plans to develop our second petrochemical complex, as we gather pace and accelerate towards taking FID in 2022. It is part of our core strategy of delivering transformational growth to serve Indonesiaís needs, supporting the expansion of our customers, and developing the domestic petrochemical industry: all fully in line with President Jokowi and the governmentís imperative call to promote self-reliance and import substitution. We are pleased to have Thaioil, Thailandís largest refinery on board as our growth partner, which enhances the security of our feedstock supply and cements our position as Indonesiaís leading and preferred petrochemical company.Ē 
Tanawong Areeratchakul, President of SCG Chemicals, says: ďSCG Chemicals welcomes Thaioil as a new strategic investor and feedstock partner. We fully support CAP and are pleased to co-invest in the development and construction of CAP2. SCG Chemicalís decade-long partnership and successful collaboration with CAP demonstrate our commitment to Indonesiaís growth. Our investment in CAP2 reaffirms our commitment to Indonesiaís long-term prosperity. We look forward to working collaboratively with CAP, Barito and Thaioil towards a successful completion of CAP2.Ē
The transaction provides opportunities for additional commercial partnership and growth. CAP has entered into a feedstock sales and purchase agreement with Thaioil for the supply of naphtha and liquefied petroleum gas to CAP and CAP 2, and a product distribution agreement, all on armís length commercial terms.
Investment in CAP 2 is projected to be around USD 5 billion. Construction is expected to take 4 to 5 years, creating 25,000 jobs over the period. It will double the companyís production capacity from the current 4.2 million tons a year to more than 8 million tons a year. This will help fulfill Indonesiaís growing domestic demand, reduce import dependency, develop the countryís local downstream petrochemical industry, support the governmentís vision for Industry 4.0, and create high-value long-term careers.

As MRC reported earlier, in H1 July, 2020, CAP, one of the largest petrochemical producers in Indonesia, received commercial products at its linear low denisty polyethylene (LLDPE)/high density polyethylene (HDPE) plant in Cilegon (Indonesia) and started ramping up its capacity utilisation. On May 22, the company was forced to reduce the capacity utilisation at this plant with a capacity of 400,000 mt/year of LLDPE/HDPE due to various technical issues.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 953,400 tonnes in the first five months of 2021, which virtually corresponded to the same figure a year earlier. High denisty polyethylene (HDPE) shipments decreased.

Thailand's Siam Cement Group (30%) and Indonesian PT Barito Pacific and (64.87%) are the main owners of Chandra Asri.
Author:Margaret Volkova
Tags:PE, LLDPE, propylene, HDPE, ethylene, petrochemistry, Chandra Asri, PTT Chemical, SCG Chemicals, Indonesia.
Category:General News
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