FocusThai PTTCH, IRPC merger seen as most possible - analysts

23 April 2009 07:03  [Source: ICIS news]

By Bohan Loh

SINGAPORE (ICIS news)--Southeast Asian oil and gas major PTT will most likely merge PTT Chemical (PTTCH) and the Integrated Refinery & Petrochemical Complex Public Co (IRPC) given the concentration of their manufacturing facilities in Thailand’s petrochemical hub - the Mab Ta Phut industrial estate, analysts said on Thursday.

PTT had said it would undertake a detailed study to pursue consolidation at its four petrochemical affiliates, including PTT Aromatics and Refining (PTTAR) and Thai Oil (TOP), to generate cost savings and create stronger companies.

All four companies are listed in the Thailand Stock Exchange.

A merged PTT Chemical (PTTCH) and IRPC would create the highest amount of synergies and long-term benefits, analysts said.

PTT owns 36% of IRPC and has a 49% stake in PTTCH.

“The physical proximity of the plants for PTTCH and IRPC would give them the most opportunities for integration,” said Narongpand Lisahapanya, an investment analyst from CLSA Securities.

IRPC’s facilities in Mab Ta Phut include a refinery and petrochemical plants that produce a wide range of products such as ethylene, aromatics, polypropylene and polyethylene.

PTTCH, on the other hand, also makes ethylene, propylene, butadiene and polyethylene at its plants at the same industrial estate. In addition, the company has a number of downstream polymer operations.

“Although there is no clear direction for a merger, we expect IRPC to be a treasure coveted by the other parties, given its exposure in refining and petrochemical business in both aromatics and olefins chains,” said Sutthichai Kumworachai, an analyst from KGI securities.

PTTAR, which also has plants in Mab Ta Phut, may be not be a likely candidate for the planned consolidation since it had just undergone an amalgamation not too long ago, said CLSA’s Lisahapanya.

The company was created in 2007 through combining the operations of between Aromatics (Thailand) Public Company Limited (ATC) and Rayong Refinery Public Company Limited (RRC).

While PTTAR and TOP, both 49%-owned by PTT, are mostly engaged in aromatics production, integrating their operations may not make sense given the distance between Mab Ta Phut and Sri Racha in the Chanburi province, where TOP’s plants are located, analysts said.

“TOP is the backburner in this situation,” said KGI’s Kumworachai.

PTT CEO Prasert Bunsumpun was targeting to draft a consolidation proposal by the fourth quarter of this year, which analysts thought to be “overly ambitious.”

“I think this whole process is going to take between one and a half to two years at least,” said CLSA’s Lisahapanya.

A PTT spokesperson had indicated that if a plan could be firmed up by early-2010, approval could be sought from the shareholders of the companies to be merged during the annual general meeting next year.

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By: Bohan Loh
+65 6780 4359



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