Malaysia’s Petronas Chemicals Group (PCG) said it has agreed to sell a 50 per cent stake in its polymers business to a unit of Saudi Aramco for US$900 million, to share risk on the project which is still underway.
The polymers company called PRPC Polymers whose activities are to develop, construct, commission and operate polymers and glycol plants, has not commenced operations since its incorporation early 2015. At the end of last year, it made a net loss of RM57 and has net assets worth RM1.3 billion.
The sale to Aramco Overseas Holdings (AOH), Saudi Aramco’s Dutch registered company whose main business is financial holdings, will be completed by March 15 2018, the statement said.
“The project is still at construction phase and the risk will remain high until project completion in 2019,” the Malaysian company, a unit of state oil giant said, adding that the deal value is the total project cost incurred so far.
The share purchase agreement includes the sale to AOH of 50 per cent of shareholder loans held by PCG in the polymers unit, it said in a statement to Bursa Malaysia, the exchange it is listed on.
“This agreement strengthens Saudi Aramco’s position and growth in South East Asia through crude supply and world-scale downstream operations,” Saudi Aramco VP International Operations, Said Al-Hadrami said in a separate statement by the Saudi state energy group.
“Through this venture, we will also achieve a high degree of integration between refining and petrochemicals, with petrochemicals production greater than 10 per cent of crude intake. It is also in tandem with our downstream growth strategy where we are investing in a global refining and petrochemicals system of strategically located world-scale manufacturing complexes with participated refining capacity of several million barrels per day.”
Petronas Chemicals said its reduced expenditure and positive cash flow from the deal will provide it the financial flexibility to pursue other strategic growth projects, including other collaborations with Saudi Aramco.
Additionally, Saudi Aramco will supply up to 70 per cent of crude supply to PRPC Refinery and Cracker, which eventually will lead to the sustainability of feedstock supply from PRPC RC to PRPC Polymers.
The deal follows on from an agreement in February in which Aramco Overseas will take 50 percent of PRPC Refinery and Cracker from Petronas Refinery and Petrochemical Corporation (PRPC).
The transaction is subject to the approval of merger control authorities in the jurisdiction of both parties.
PETRONAS is the major shareholder of PCG with equity interest of 64.35 per cent.