Thai Oil to buy 15pc stake in Indonesia’s Chandra Asri

Market: LPG, Oil products, Petrochemicals
30/07/21

Thai Oil, the downstream unit of Thailand's state-controlled PTT, has agreed to acquire a stake of up 15.38pc in Indonesia's largest petrochemical producer Chandra Asri.

The stake acquisition is valued at up to $1.18bn, the firms said, and the proceeds will be used to fund Chandra Asri's planned petrochemical complex, Chandra Asri Perkasa (CAP2), at Cilegon in west Java.

Chandra Asri owns Indonesia's first and only naphtha cracker with 900,000 t/yr of ethylene production and 490,000 t/yr of propylene output in Cilegon. Refiner Thai Oil supplies oil products in Thailand from its 275,000 b/d Sri Racha refinery. It is upgrading and expanding the refinery as part of its clean fuel project to 450,000 b/d, with it targeted to be completed by 2023.

Construction of CAP2 is expected to be completed by 2025, with a projected investment of around $5bn. The new cracker will have nameplate capacity of 1.1mn t/yr for ethylene and 600,000 t/yr for propylene. Integrated derivative units can produce 750,000 t/yr of polyethylene and 450,000 t/yr of polypropylene.

Thai Oil has also signed a sales and purchase agreement with Chandra Asri to supply feedstock naphtha and LPG to the latter's existing and new CAP2 crackers in Cilegon.

The CAP2 project was initially envisioned to be a collaboration between Chandra Asri and Indonesia's state-owned Pertamina. Abu Dhabi's state-owned Adnoc also signed an initial agreement last year with Chandra Asri to explore a future naphtha supply deal for the latter's existing and new crackers. But there have been no further updates on these agreements.

Besides the feedstock supply deal, Thai Oil has also secured the right to distribute 176,000 t/yr of polymer resins and 124,000 t/yr of liquid chemical production from Chandra Asri's existing cracker and CAP2. The polymer resin deal marks the company's first foray into the polyolefins market. Thai Oil currently has a presence only in the market for liquid chemicals, which include toluene, xylenes and benzene.

Share acquisition deal

Thai Oil's share acquisition in Chandra Asri will be completed in two phases. Thai Oil will first acquire 15pc of Chandra Asri's total shares at an investment amount capped at $914mn by obtaining the rights of existing shareholders, including Barito Pacific, Marigold Resources and major shareholder Prajogo Pangestu, known as the Barito group. The transaction is subject to regulatory approvals and expected to be completed by 30 September 2021.

Fellow Thai petrochemical producer Siam Cement (SCG), also one of Chandra Asri's major shareholders, will be offered share purchase rights to maintain its existing 30.75pc ownership. The total investment from both Thai Oil and SCG is valued at up to $1.3bn.

Thai Oil will fund part of the acquisition cost through a loan not exceeding $670mn from PTT.

After the 15pc share acquisition, Thai Oil will be given an option to purchase another 0.38pc of Chandra Asri's total shares subject to when a final investment decision (FID) on CAP2 is made. If the FID on the development and construction of CAP2 is finalised within five years from the first round of share acquisition, Thai Oil will exercise the option to acquire the additional share at below $270mn. Otherwise, Thai Oil has the option to buy the additional 0.38pc stake at below $3.9mn. Thai Oil's total share acquisition cost during the two phases will not exceed $1.18bn, it said.

The deadline for reaching the FID on CAP2 is next year.

By Bohan Loh and Toong Shien Lee

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