Citic using TPI bid as foothold into Chinese petchem mkt

06 June 2005 10:27  [Source: ICIS news]

SINGAPORE (CNI)--Hong Kong-listed Citic Resources Holdings (Citic) plans to export the output from Thai Petrochemical Industry (TPI) to China, if a consortium that it is part of successfully takes over the debt-laden TPI, a company official told CNI on Monday.

 

Citic is a subsidiary of China International Trust & Investment Corp, and is involved in the timber business as well as the trading of commodities and natural resources. Last week, it announced that it could form a joint venture with six TPI shareholders, including founder Prachai Leophairatana, to buy 75% of TPI's issued share capital worth around $2bn (Euro1.62bn) and refinance the debt of around $2.95bn.

 

The official said that Citic was looking to make headway in the petrochemical trading business with this investment. Its parent company has already been involved in the financing of several petrochemical projects in China.

 

“The market for petrochemicals is growing in China. TPI’s biggest attraction is its assets, which produce a wide range of petrochemical products. If the joint-venture is successful, we will look to export a substantial amount of the output to China,” said the official. She was unable to say what percentage of the output would be exported.

 

She reiterated that the terms of the joint venture had not been decided as Citic was still conducting due diligence on TPI. Thailand's ministry of finance, which is TPI’s administrator, has signed an agreement to sell a 61.5% stake in the company to a government linked consortium which includes national oil, gas and petrochemical major PTT Pcl.

 

“The matter is now before Thailand’s Central Bankruptcy Court, which will decide whether our bid can go through. We can’t comment on anything further with regards that,” she said.

 

If the Citic joint venture’s bid were approved, the company would dip into its cash reserves and seek financing from its parent company to pay for TPI.

 

TPI collapsed under a mountain of debt after the devaluation of the Thai Baht following the 1997 financial crisis. Prachai has tried his best to prevent the company’s sale over the last few years but has been unsuccessful so far, and analysts were sceptical last week as to whether this joint venture with Citic would be successful.

 

Analysts have agreed that TPI would be a star performer if not for its debt profile. Its assets include a refinery, cracker, and downstream plants that produce a wide range of petrochemicals including polyethylene (PE), polypropylene (PP) and styrenics. The company also has its own utilities and port services.

By: Siva Govindasamy
+65 6780 4359

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