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Materials

Cheap shale gas attracts Thai petrochemical major to Ohio

PTT readies $5bn war chest to turn US into 'second home base'

BANGKOK -- PTT Global Chemical, an arm of Thai energy major PTT Group, has set aside $5 billion for its next five-year investment, of which around 80% will be spent on a petrochemical complex in the U.S. and acquisitions.

Chief Executive Kongkrapan Intarajang said the company is on track to make a final decision on the U.S. project by mid-2020. The process is moving as planned, including approval from U.S. authorities, environmental assessments and the choice of a construction company, the CEO said.

"The petrochemical complex in the U.S. will be our second home base," Kongkrapan told the Nikkei Asian Review. "We choose to invest in the U.S. because we can gain cheap raw material from shale gas near our location, while we have a big consumer base there."

Kongkrapan said PTTGC's petrochemical complex will be on a 500-acre site in Ohio, where the Thai company has a 50-50 joint venture with South Korean petrochemical maker Daelim Industrial.

PTTGC has conducted feasibility assessments on a U.S. investment for the past few years and found that a plant there could access raw materials at low costs from the local shale gas industry, Kongkrapan said.

PTTGC plans to produce specialty plastics and other petrochemical products geared for the auto parts and electronics industries.

"This is our biggest investment due to happen this year for sustainable business development," Kongkrapan said. Once a decision is made, "we can start construction immediately."

Plans call for completing the complex by late 2025, with commercial operation to begin in early 2026, he added.

The CEO said the company has a very low debt-to-equity ratio of 0.3, giving it freedom to borrow a significant amount for the project.

PTTGC already has received shareholder approval to issue $500 million of debt and will seek approval for another offering worth $4.5 billion at a shareholder meeting in April. The company also has cash on hand of around 30 billion baht ($945 million).

Apart from investing in the Ohio petrochemical complex, Kongkrapan said the company also intends to use the U.S. as a base from which to explore mergers and acquisitions this year.

He said weak global demand, largely caused by the U.S.-China trade war, has made acquisitions a more attractive investment option than greenfield projects.

"As we are in the downward cycle, there could be several petrochemical companies with good potential but still have to struggle to survive, and that's a good time for us to look around and buy those companies, which can generate additional profit immediately," said Kongkrapan.

PTTGC posted profit of 12.3 billion baht in 2019, down 69% from net profit of 40 billion baht in the previous year, due to weak global demand and falling profit margins.

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