Chandra Asri Petrochemical Expands Butadiene Factory

INDUSTRY.co.id - Jakarta - PT Chandra Asri Petrochemical Tbk (TPIA) continues to expand its business by expanding its butadine plant as well as utilizing positive financial performance growth.

The largest petrochemical company in Indonesia will issue new shares through a rights issue of Rp5.03 trillion or about US $ 378 million. Preemptive rights (HMETD) have been effective since last week.

The proceeds from the rights issue will be used for the expansion of the butadine plant which is estimated to cost US $ 42 million and is targeted to be operational in the second quarter of 2018. Chandra Asri's offerings are well received in the market, resulting in excess order book.

Most of the order books come from big Thai investors, local and international long-term investors, multi-strategy funds and insurance companies. The order book placement is allocated very tightly, with the top five investors getting 90% of the total order book and the top 10 investors earning 95% of the total order book.

The rights issue proceeds, in addition to building new factories, to finance capital expenditure to increase business scale. One of them, to increase production capacity and product diversification, the additional production capacity is naphtha cracker.

This expansion is estimated to cost US $ 45 million and is planned to operate in the first quarter of 2020. In addition, the company targets to operate a new polyethylene plant in the fourth quarter of 2019, this investment will cost US $ 356 million.

Later by adding one factory, the production capacity of polyethylene plant which is currently 336,000 tons per year could increase by 400,000 tons per year. Thus, the total production capacity of polyethylene reaches 736,000 tons per year.

Further projects that are still in the planning, TPIA will expand the estimated polypropylene plant costing US $ 15 million. The expansion of the polypropylene plant could increase production capacity from 480,000 tons per year, to 590,000 tons or an increase of 110,000 tons per year.

Then, TPIA also plans to diversify its products by building a methyl tertiary butyl ether (MTBE) and butene-1 plant. This expansion is estimated to cost US $ 100 million and is estimated to commence operations in the second quarter of 2020.

Finally, TPIA also plans to build a second petrochemical complex that is estimated to require approximately US $ 455 million.

Meanwhile, Binaartha Sekuritas analyst Reza Priyambada said TPIA shares have good prospects with expansion plans and business diversification. The Company is actively investing for the construction of a plant in Cilegon, Banten. "Do a buy action as long as the price stays above Rp25.275," Reza said.