02 December 1996 00:00 [Source: ACN]
THAI Olefins Co (TOC) will finalise alternative plans to bail itself from financial woes this month, following a decision last week by National Petrochemical Co (NPC) to call off the merger.
A TOC official said the company's board of directors will meet on 20 December to evaluate plans to debottleneck its ethylene and propylene production, and also discuss ways to reduce production costs.
The official, however, said it was too early to elaborate. TOC currently produces 350 000 tonne of ethylene and 190 000 tonne/year of propylene.
An NPC official said that these plans, if implemented, could save TOC from its current financial standing. However, the high costs involved may block TOC from achieving its plan.
Industry sources said NPC's decision to reject financial advisor Finance One's recommendation to merge came as no surprise. NPC shares were stable at Baht28 (US$1.1)/share even after NPC's announcement.
'TOC's losses are just too great for NPC to handle,' an analyst with Crosby Securities said. TOC, the bigger of the two companies, said losses approximated Baht500m last year, despite it having started its cracker only in early April after rectifying a problem with a heat exchanger.
NPC, however, cited the need to concentrate on its NPC3 expansion project as the main factor opposing the merger. NPC3 comprises investment in a range of intermediate and downstream products such as 2-ethylhexanol (2-EH), ethylene oxide and ethylene glycol.
The company will sign a partnership agreement with Mitsubishi on 3 December to produce 70 000 tonne/year of 2-EH. Production is expected to start up in 1999, the NPC official said.
Each company will hold a 50% stake in the Baht3.65bn project. NPC also plans to become a small power producer.
Officials from both parties have said that although the merger is off, they hope to collaborate in future projects.
The Petroleum Authority of Thailand (PTT), which is the majority shareholder in both NPC and TOC, will also be studying the feasibility of combined olefins production and business integration, a PTT official said.
The NPC official agreed that there are long-term benefits from collaboration. The official cited marketing, manpower and sharing of facilities such as jetty and buffer tank facilities as areas in which co-operation is likely.
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