KUALA LUMPUR: Lotte Chemical Titan Holding Bhd’s (LCT) gearing will rise to 0.99 times once its new petrochemical factory in Indonesia is completed in 2023.
“With the new plant, it will rise to 0.99 times from zero-gearing position currently with no borrowings. We are comfortable with a gearing level of one to two times, so 0.99 times is acceptable for us, ” said president and CEO Lee Dong Woo after the company’s EGM.
Lee, who was represented by the company’s executive vice-president of corporate planning Philip Kong at the EGM, said a total of RM11bil would be borrowed to build the plant.
“When we borrow for this plant, the repayment would commence when we start operations (of the plant). Prior to that, there is no repayment. We will fund this project with our own money and the parent company’s money.
“Hopefully we can incur very little borrowings, which means we can continue to fund our operations and dividend payment, ” Kong said.
The project will cost RM18bil in total and be funded with 60% borrowings and the remainder through equity.
“Some RM7bil is through equity funding. The parent is funding RM3.6bil while we will put in RM3.7bil. We have obtained RM2.8bil from the initial public offering proceeds and another RM900mil cash would be funded through internally generated funds, ” he said.
The company yesterday obtained 99.978% shareholders’ approval for the divestment of its 49% equity interest in PT Lotte Chemical Indonesia (LCI), a wholly owned subsidiary of LCT, to its major shareholder, Lotte Chemical Corp (LCC).
“As we have got the approval from our shareholders at this EGM, we will commence the tender exercise for this project and the land clearing. We target to start construction in the later part of 2020.
“The plant is expected to significantly boost the company’s production capacity by around 80%.
“The new integrated complex, with a capacity of a million tonnes per year of naphtha cracker and other related downstream petrochemical facilities, will provide better product mix and improve overall operational efficiency, ” Lee said.
Kong said that with the new plant, the company’s total production would rise to more than 5 million tonnes in 2023 from 3.5 million tonnes currently.
LCT said it believed that the plant is an attractive business proposition due to Indonesia’s dependency on petrochemical imports.
It said Indonesia is also expected to remain a large net importer of polyolefins and the domestic plastic demand gap is expected to further widen following the rising population and healthy consumption growth.
LCT produces and sells raw materials called polyethylene and polypropylene used in the plastic fabrication business.
It also makes and sells butadiene, a raw material that is used in the tyre-making industry.