THE award for the engineering, procurement and construction (EPC) contract for the multi-billion ringgit phosphate additives plant being planned for Sarawak will be announced next week.
While on the face of it this may not be too exciting a development, it is part of a chain of events that will eventually lead to the completion of a reverse takeover of a little known Singapore-listed company called OLS Enterprise Ltd by one of the shareholders of the phosphate plant project.
In essence, a 40% stake in the planned integrated phosphate complex, which will be located in the Samalaju Industrial Park, Bintulu Sarawak, is being injected into OLS.
The said 40% stake is partly owned by Malaysian Technology Development Corporation Sdn Bhd (MTDC), a wholly-owned subsidiary of Khazanah Nasional Bhd, together with several parties.
This means that MTDC will end up as one of the major shareholders of OLS.
OLS announced the reverse takeover proposal in May last year, involving a deal worth about US$222mil, according to filings on Singapore Exchange.
Essentially, a company called Malaysian Phosphate Additives Sdn Bhd (MPA) is being injected into OLS.
The owners of MPA are MTDC and private individuals, a joint venture that had began years ago to embark on building up phospate additive plants. MPA already has a 30,000m metric tonnes a year phosphate plant in Lumut, Perak.
MPA’s mainstay now is its 40% equity in Malaysian Phosphate Additives (Sarawak) Sdn Bhd (MPAS), which is the owner of the planned phosphate derivatives complex in Sarawak that aims to produce 16 times more than the Lumut plant, with a capacity of 500,000 mt a year. The other sharehodlers of the latter are Cahya Mata Sarawak Bhd and Tradewinds Corp Bhd that own 40% and 20% respectively.
It is understood that the RTO exercise will enable MPA to tap into Singapore market to raise funds for their portion of the RM1.9bil project.
The phosphate additives plant is reportedly to commence operations in 2018 and had already completed ground preparations for construction of the first phase.
The RTO is to be satisfied fully through an allotment and issue of OLS shares. The issue price is yet to be determined.
Upon the completion of the proposed acquisition of MPA, MTDC would own about 40% in MPA.
Under the proposed acquisition of MPA, OLS will inject RM10mil in MPA through a subscription of MPA convertible notes, which has 3% interest rate a year.
The sum would be fully convertible into MPA shares of about 5% stake upon successful completion of the proposed acquisition.
The phosphate additive complex in Sarawak is estimated to have an annual production capacity of 500,000 metric tonnes, making it the largest in South-East Asia.
The complex is also expected to prduce 900,000 tonnes per annum of coke and 100,000 tonnes per annum of ammonia, it has been reported.
Food phosphate is used mainly in crude palm oil refining and in the production of various types of food and beverages, cola fizzy drinks, food source for cakes and noodles while fertiliser phosphate is used in the production of compound fertiliser, nitrogen phosphorous potassium.
Sources said that the financing of the project is expected to be finalised after the EPC contract is signed.
It has been reported that the one of the main shareholder in MPAS, Cahya Mata Sarawak has announced a plan to raise RM1bil sukuk to partly finance its 40% stake in the plant.
“The main advantages to open a plant in Samalaju is because of cheaper electricity rate compared to in Peninsular Malaysia.
“It is also within the proximity of the Samalaju Port that would reduce the cost for logistics significantly and cheaper land price in the area compared to Lumut,” said an analyst.
It has been reported that MPA has signed a power purchase agreement term sheet with Syarikat Sesco Bhd, a unit of Sarawak Energy Bhd, for the supply of 150MW of power for the phosphate complex project.
It is understood that MPAS’s annual average revenue is estimated at RM2.9bil of which over 80% would be from export income.
The plant will provide jobs to some 1,200 people, including engineers and project supervisors.
Industries which are in operation in Samalaju Industrial Park are Press Metal Bhd’s aluminium smelter, Japan’s Tokuyama Corp’s polycrystalline silicon plant, OM Materials (Sarawak) Sdn Bhd’s ferro silicon smelting plant and SIG Gases Bhd’s industrial gas plant.