SELOGA Holdings Bhd is teaming up with two Thai partners to set up a US$63.5mil (RM241.3mil) asphalt plant in Kemaman, Terengganu.
The company has taken up a 50% stake in a joint venture company, Kemaman Oil Corp Sdn Bhd (KOC), which in turn owns a 94% stake in Kemaman Bitumen Sdn Bhd (KBSB), the company that will operate the asphalt plant.
The two Thai partners are Tipco Asphalt Public Company Limited (TASCO), which holds a 40% stake in KOC, and Thai Bitumen Company Ltd (TBC), which owns the remaining 10% interest.
Both Thai partners are involved in the manufacture of asphalt products for Thailand and for export to China and the region.
KOC will subscribe for ordinary shares of RM1 each in KBSB, up to an amount equivalent to US$6.5mil (RM62.7mil).
Seloga chief executive officer Tan Sri Halim Saad said the asphalt business offered big profit margins and that there was no other player in the local market.
“We are the only one here. Besides, the payback period (for the investments) will be about three years. Not many projects can give a payback this fast,” he told a press briefing at his office in Kuala Lumpur yesterday.
Chief financial officer Koh Lai Huat said the plant was expected to generate an average EBITDA (earnings before interest, taxation, depreciation and amortisation) of 15%.
Halim said the investment would be satisfied through a combination of equity and debt, of which the financing would be secured through local financial institutions.
Koh said the construction of the plant would begin next month and would be completed in 16 months. “We have cleared the 22-acre site next to Kemaman Port,” he said.
The plant is expected to produce 800,000 tonnes of bitumen annually for local consumption and also exports.
Koh said both Seloga and TASCO were working on a proposal for the Thai partner to buy a substantial amount of the plant’s output for 10 years. “That arrangement would give Seloga an immediate market for the products,” he said.
Did you find this article insightful?