SET-listed PTT Global Chemical Plc (PTTGC), Thailand's largest petrochemical producer, has joined forces with Sanyo Chemical Industries (SCI) and Toyota Tsusho Corporation (TTC) on a specialty polymer production facility at a total investment cost of US$900 million (30 billion baht).
The three firms signed an agreement yesterday in Bangkok with four commercial banks on credit facilities to form a joint venture, GC Polyols Co.
The venture is based at Hemaraj Eastern Industrial Estate in Rayong province and will produce polyols, a key raw material for polyurethane.
PTTGC president and chief executive Supattanapong Punmeechaow said GC Polyols is expected to start construction of the polyols facility by September and start operations by the second half of 2020.
"This deal is an important step for PTTGC to follow the government's policy to make Thailand a fast-growing economy, because polyols is one of the major high-value-added products," Mr Supattanapong said.
Polyols and polyurethane have higher value compared with common commodity-grade polymers or polyethylene.
GC Polyols's shareholders comprise PTTGC with a 82.1% stake, Sanyo Chemical (14.9%) and TTC (3%).
Under the joint venture agreement, PTTGC will supply feedstock of propylene oxide and ethylene oxide, which are key raw materials for polyols, which will be used for making several types of products such as polyurethane, a polymer used in production of cars and electronics and in construction.
SCI will provide technology and know-how to the new GC Polyols and fulfil customer requirements, while TTC will lend support with its strong marketing and sales network around the world.
The production plant, which is located in Thailand's Eastern Economic Corridor (EEC), will have an annual capacity of 130,000 tonnes of polyether polyols and 20,000 tonnes of polyurethane.
Credit facilities will be provided by Krungthai Bank, Land and Houses Bank, Thanachart Bank and Kiatnakin Bank at a combined 23.1 billion baht.
Patiparn Sukorndhaman, president of GC Polyols and also the chief operating officer of PTTGC, said the new firm is expected to generate additional revenue of 10 billion baht a year, to be shared by stakeholders via the equity base.
Meanwhile, PTTGC is expected to make a final investment decision on another joint venture agreement with Japan-based Kuraray Co and Sumitomo Corporation, a chemical producer and international trader, respectively, within three months.
PTTGC and the two Japanese firms have already signed a memorandum of understanding to conduct a feasibility study on the project and are due to form a joint venture soon if all details and their feasibility have been concluded.
By this year, PTTGC is expected to seal two agreements for the specialty polymer grade, in line with company policy to expand its business into performance and specialty chemicals and downsize commodity-grade polymers.
Over the past five years, PTTGC has allocated 3% of its net profit to research and development of high-value products. The company wants to increase revenue from high-value products from the current 4% to 20% of petrochemical revenue over the next 10 years.
PTTGC shares closed yesterday on the Stock Exchange of Thailand at 74 baht, down 25 satang, in trade worth 429.8 million baht.