Green light for $320m integrated phosphate complex in Malaysia

31 December 2013 13:48 Source:ICIS News

By Richard Ewing

LONDON (ICIS)--Malaysia's Cahya Mata Sarawak Berhad's (CMSB) wholly-owned subsidiary Samalaju Industries Sdn Bhd (SISB) has entered into a shareholders' agreement with several joint venture partners for the development of southeast Asia's first integrated phosphate complex, the company announced on Tuesday.

Construction of the Malaysian ringgit (MYR) 1.04bn (US$317m, €228m) plant is scheduled to get underway in the first quarter of 2014 and will become operational in phases from first quarter 2016 and fully operational from second quarter 2018, CMSB said in a statement.

The complex, which will employ around 1,000 workers, will boast an annual production capacity of 500,000 tonnes of phosphates like phosphoric acid and related products such as ammonia. In addition, some of the plant's production will be used as feedstock to a proposed nitrogen, phosphorous and potassium (NPK) plant next to the facility.

Situated on approximately 350 acres of land at Samalaju Industrial Park (SIP), in Malaysia's Sarawak state, the project will be situated close to the new Samalaju deep water port and will benefit from "competitively priced long term supply prices and supporting infrastructure" in the Sarawak Corridor of Renewable Energy (SCORE), CMSB added.

Malaysian Phosphate Venture Sdn Bhd (MPVSB) and Malaysian Phosphate Additives (Sarawak) Sdn Bhd (MPASSB) will each own a 40% share in the venture and Arif Enigma Sdn Bhd (AESB) the remaining 20% stake. The project will be funding by a combination of shareholders' equity and long term bank funded debt that is currently being arranged.

The statement added: "Concurrent with the signing of the shareholders' agreement, MPASSB has also firstly, finalised the Power Purchase Agreement Term Sheet (PPA Term Sheet) with Syarikat Sesco Bhd for the supply of the 150MW of power required.

"The parties are expected to sign the PPA Term Sheet in early January 2014 and this will be followed up with a Power Purchase Agreement between the parties, which is expected to be signed first quarter 2014. Secondly, MPASSB has entered in a sale and Purchase agreement with SISB for MPASSB to purchase from SISB approximately 350 acres of land in SIP to be used for the complex."

CMSB group managing director, Richard Curtis, commented: "CMSB's investment in this project represented its second investment into SCORE located energy intensive industries and was of special significance in that phosphate complex embodied two firsts; this complex is the first one of its kind in Malaysia and indeed South East Asia: secondly, it is the first non-metal or alloy based plant in SCORE's SIP, thus taking SCORE and CMSB into a dynamic new industrial sector that offers long term sustainable demand growth.

"Phosphorus is an essential base nutrient for animal and plant growth with no substitute and is widely used in food, feed and fertilizer products. Demand is growing due to population growth, changing dietary preferences and the increased use of fertilizers."

MPVSB executive director, Lim Lee Wan, added: "The success of our first phosphate additives plant in Lumut, Perak, has proved the value and scalability of our particular manufacturing processes. Our Sarawak phosphate complex will enable Malaysia to both reduce imports of phosphate products and to expand the production of 'Halal' animal feed and fertilizers.

"For Malaysia's food and fertilizer industries this will enhance both supply security and price competitiveness as well as establishing a platform for future export orientated downstream industries."

In an accompanying statement that was also released on Tuesday, CMSB explained its rationale and prospects for the plant and provided a breakdown of the estimated cost of the facility, comprising MYR570m for the plant and equipment, MYR305m for utilities, building and land, MYR65m for design and engineering (consultants), MYR80m for contingency cost and MYR20m for insurance.

"The competitive price of power at Samalaju which is a major component of the unit production cost, the strategic location of the plant next to the Samalaju deep sea port, proximity to the growing phosphorus markets in South East Asia and Indian sub-continent, present significant competitive advantages over the main competitors from China, Vietnam, Kazakhstan, North Africa and the Middle East.

"The integrated phosphate complex at Samalaju is well positioned to compete with China imposing export tax ranging from 15% plus 50 RMB/MT [50 renminbi/tonne ($8.26/tonne)] depending on product and season, the increasing power cost in China and Vietnam, anti-dumping against China and Kazakhstan and the flexibility of integrated plant. In order to capitalise on the power advantage, the focus is on the food and industrial phosphate products and its synergies with the feed and fertilizer grades."

($1 = 3.27MYR , $1 = €0.72, $1 = RMB6.05)

By Richard Ewing