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Siam Cement gets $3.2bn for Vietnam chemical project

Loan from Mizuho, SMBC and Thai banks enables construction after delays

Siam Cement will continue its plan to develop the Long Son petrochemical complex in Vietnam.   © Reuters

BANGKOK -- Thai industrial conglomerate Siam Cement Group has obtained a combined $3.2 billion loan from six local and foreign banks to press ahead with its investment in a long-delayed petrochemical complex in Vietnam.

The six banks that awarded the big-ticket loans to SCG are Sumitomo Mitsui Banking Corporation, Mizuho Bank, Bangkok Bank, Krung Thai Bank, Siam Commercial Bank and Export-Import Bank of Thailand.

Roongrote Rangsiyopash, SCG's chief executive, said the group is now ready to start construction of Vietnam's first petrochemical complex.

"We have already got the loan, and there is no need to wait for anything," he told the Nikkei Asian Review. "We are ready for the start, and it will be done as planned."

With a leverage ratio of 1.6 and hefty cash flow of more than 68 billion baht ($2 billion), SGC expects to have strong liquidity to run the Long Son petrochemical complex project, Roongrote said.

  The secured loans from the lenders account for 60% of a total investment value of $5.4 billion, while the remaining $2.2 billion will come from the company's capital expenditure.

“SMBC has been actively supporting Asian companies’ foreign expansion,” said Yuichi Nishimura, SMBC’s regional head of the Greater Mekong Sub-Region. "Among the regional economies, we position Vietnam as a market with particular potential as it enjoys relatively high economic growth."  

Roongrote said construction is due to start soon and commercial operation should begin in 2023. The project is expected to generate around $3 billion of revenue for the Thai conglomerate.

Analysts see Long Son as a long-term source of sustainable revenue as demand for petrochemical products in several industrial sectors in Vietnam is expected to grow rapidly along with the country's economy.

"SCG has not yet invested in such a big project," said an analyst at Asia Plus Securities. "So the project in Vietnam is the big one that would create economy of scale to allow SCG to produce products with competitive advantage."

The Thai conglomerate has taken full ownership of the long-delayed project in southern Vietnam after buying out its Vietnamese partner.

The delay was caused by shareholding issues since the project was initially planned to be operated by three investors: SCG with 46%, Qatar Petroleum subsidiary QPI Vietnam with 25%, and Vietnam Oil and Gas Group (PetroVietnam) with 29%.

The Qatari partner withdrew in 2015 after global oil prices plummeted, and SCG bought the stake last year. It also purchased the remaining 29% of the shares in Long Son from PetroVietnam, making it the sole operator.

Long Son is to produce high-density polyethylene and synthetic fibers called olefins with a production capacity of 1.6 million tons a year. The large capacity will help create an economy of scale that increases the company's competitiveness to meet rising demand for special-grade plastic in several industrial sectors in Vietnam. The complex will also be positioned as a production base for olefins to be exported across the ASEAN countries.

SCG posted a net profit of 34.3 billion baht in the first nine months of this year, down 19% on the year due to asset impairments.

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