THAILAND: PTTGC eyes new chemical plant to tap Asean

The investment is part of the company's strategic plan to enlarge its presence in the global chemicals industry after the successful merger of PTT Chemical and PTT Aromatics and Refining, two subsidiaries of the country's national oil company PTT, to form PTTGC on 19 October 2011.

Chief Executive Officer Veerasak Kositpaisal said there were no TDI plants in the Asean region and PU manufacturers in this region have to import TDI. Thus it is a good opportunity to establish a plant in this region. Thailand is one of the potential sites, as it has a petrochemical complex in Rayong province. Besides, PTTGC also has benzene production, the feedstock for making TDI, in its chemicals value chain.

The plan to establish a TDI manufacturing plant in this region came after PTTGC announced plans to spend EUR 114.8 million (Bt4.7 billion) for a 51 % stake in Perstorp Holding France. In its statement on the deal, PTTGC stated that it would increase the production capacity of Perstorp.

"TDI is a chemical used in the automotive and construction industries," Veerasak said. "This segment is growing very fast in Asia, while in Europe it is slowing down. Perstorp is also interested in growing its business in this region. So, after the acquisition process is completed, we will discuss this expansion in Asean with Perstorp." He said the value chain of polyurethane was quite long, and PTTGC had other plans to invest more in this chain.

Since the formation of PTTGC, it has announced two acquisition deals. The first is the deal to acquire a 50 % stake in NatureWorks, a leading manufacturer of polylactic acid (PLA) used to produce bioplastic products, with USD 150 million (Bt4.6 billion). PTTGC announced this deal in October, followed by the Perstorp deal in November. The NatureWorks deal is expected to be completed in the first quarter of next year.

As PTT Chemical, PTTGC was earlier successful in investing USD 60 million in US-based Myriant, a bio-based technology-development company. The acquisition will lead PTTGC to enlarge its business in bio-based chemicals.

"We've announced plans to expand our business overseas aggressively since we formed PTTGC. Our acquisitions started in the US and Europe. Regarding our strategy, we have many acquisition deals in the pipeline, and these deals have the potential to lead to new investments," he said.

Despite the aggressive plans to enlarge its business overseas, Veerasak insisted that the plans would follow good financial discipline. The company has credit ratings of AA- (tha) from Fitch, Baa2 from Moody's, and BBB from S&P.

To maintain these credit ratings, PTTGC has to ensure its net debt-to-equity ratio does not exceed 0.7 times and net debt-to-earnings before interest, tax, depreciation and amortisation ratio is not over 2.4 times. The ratios right now are lower than 0.5 times for D/E and 1.5 times for the latter.

Veerasak said that besides the budget prepared for the new acquisition deals, the company had to allocate some funds for new investment projects. It plans to spend many millions of baht to set up a pilot plant for PLA next year.

This is a step before it invests in the commercial scale of 150,000 t/y. And it is possible to invest for a new TDI plant in this region as well, the production capacity and investment size of which are yet to decided.

"No matter what the numbers of deals we expect to achieve, deals that fit with our strategy and can fulfil our plan to become a global leader are the most important."

"We can grow more in this region and the world market. In Asean, the demands for petrochemicals are four times those of Thailand alone, but the population of 600 million in this region is 10 times that of Thailand. This means that we have room to grow," he said.

Source: Daily "The Nation", Bangkok; 14 Dec 2011

(Syed Rashid Ali, Karachi, Pakistan)