July 22, 2008

SCG Granted Vietnam Licence

By Bangkok Post, Thailand

Jul. 22--The Vietnamese government has licensed the joint venture between the state-run PetroVietnam and the Siam Cement Group (SCG), Thailand's largest industrial conglomerate, to build a US$3.77-billion petrochemical complex in Vietnam.

According to the local media, the Vietnamese government confirmed its approval for the gigantic petrochemical project.

The SET-listed industrial group said after it received the investment licence from Vietnam's Ministry of Planning and Investment, the company would apply for project incentives from the government.

"The value of total investment can't be confirmed yet, we are now revising the final project configuration. The timing to start construction and operations is to be confirmed," said a SCG spokesperson yesterday.

The company also needs to seek an approval from the board of directors which will meet tomorrow but it was not confirmed that the project will be included in the agenda.

The project is one of the SCG's major investments and part of its plan to strengthen its main business in the long run by investing in locations rich with oil and gas reserves, the main feedstock of the petrochemical industry.

The project run by the Long Son Petrochemical Co is scheduled to be built in the southern Ba Ria-Vung Tau province, east of Ho Chi Minh City, and is set for completion in 2013, the Dau Tu (Investment) newspaper reported.

The licence was granted to two units of Siam Cement -- Vina SCG Chemicals and Thai Plastic and Chemicals -- which would together own 71 percent, with Vietnam's state-run Vietnam Oil and Gas Corporation (PetroVietnam) and Vietnam National Chemical Corp holding the rest.

The plant will be close to a refinery that Vietnam plans to build at Long Son -- its third after the central Dung Quat refinery, which is due to go online next year. A northern Japanese-Kuwaiti refinery is to start operating in 2013.

The project will produce 1.65 million tonnes of olefins, 1.45 million tonnes of polyolefins, 280,000 tonnes of soda and 730,000 tonnes of vinyl chloride monomer (VCM), a material for polyvinyl chloride (PVC).

Cholanat Yanaranop, president of SCG Chemicals, said earlier that the company had planned to start building the complex in early 2009. The complex is scheduled to begin production of PVC-related products in 2011 and olefins in 2013.

According to Tisco Securities research, SCG's pre-exceptional earnings would dip by 4 percent this year ahead of a mild recovery by 3 percent next year.

The slight drop is due mainly to a cyclical downturn in the petrochemical industry, which is expected to begin in the second half of this year. However, its long-term investment programme worth 120 billion baht during 2005 to 2010, with the planned doubling of its olefin and polyolefin capacities should enable the group to sustain future earnings growth starting from 2009.

The company is expanding its overseas business, particularly in Vietnam, and long-term its potential is tremendous.

"We see SCC as remaining solidly profitable, though its earnings growth may be unexciting. Benefits from the expansion implemented during the past few years are about to kick in and this should help to cushion the petrochemical down cycle," said the research.

SCC shares closed yesterday at 180 baht, up six baht, in trade worth 169.7 million baht.


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