Indonesia: 1.7 Billion Dollar Investment Chandra Asri to Establish World Scale Petrochemical Complex
Chandra Asri has obtained an investment of 1.7 billion dollars to develop its second world scale integrated petrochemical complex in Indonesia. The project will include a cracker unit, polymerized olefins and related facilities and utilities.
Jakarta/Indonesia – Chandra Asri Petrochemical (CAP), Indonesia’s largest integrated petrochemical company, has selected Thai Oil Public Company (Thaioil), the flagship refiner of PTT Public Company (PTT), as its chosen Strategic Investor after a robust selection process. 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 Thaioil’s designated subsidiary that will act as the standby buyer to underwrite a successful transaction.
CAP’s major shareholders, Barito Pacific and SCG Chemicals Co., fully support this corporate action to inject equity into CAP.
The net proceeds raised will be used for the development and construction of CAP’s second world-scale integrated petrochemical complex by its subsidiary, 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 CAP’s 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 1.3 billion dollars. The transaction is still subject to requisite regulatory approvals, including from the OJK and is expected to complete no later than September 30, 2021. It will be one of the largest rights issues ever done on the Indonesia Stock Exchange (IDX).
Construction is expected to take 4 to 5 years, creating 25,000 jobs over the period.
Subject to a successful Final Investment Decision (FID) on CAP 2 targeted for 2022, Thaioil and SCG Chemicals may further collectively invest up to 0.4 billion dollars. 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: “This 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 Indonesia’s needs, supporting the expansion of our customers, and developing the domestic petrochemical industry: all fully in line with President Jokowi and the government’s imperative call to promote self-reliance and import substitution. We are pleased to have Thaioil, Thailand’s largest refinery on board as our growth partner, which enhances the security of our feedstock supply and cements our position as Indonesia’s leading and preferred petrochemical company.”
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 arm’s length commercial terms. Investment in CAP 2 is projected to be around 5 billion dollars.
Construction is expected to take 4 to 5 years, creating 25,000 jobs over the period. It will double the Company’s production capacity from the current 4.2 million tons a year to more than 8 million tons a year. This will help fulfill Indonesia’s growing domestic demand, reduce import dependency, develop the country’s local downstream petrochemical industry, support the government’s vision for Industry 4.0, and create high-value long-term careers.