As disclosed by the government's data (2019), Indonesia's domestic demand for polyethylene was recorded at 2.3 million tons annually, while its national polyethylene production stood at 280,000 tons per year.
Therefore, in filling the gap, Indonesia has no option but to import 1.52 million tons of polyethylene annually.
President Joko Widodo (Jokowi) had highlighted Indonesia's dependence on imported polyethylene when inaugurating CAP's new polyethylene plant in Cilegon, Banten Province, on December 6, 2019.
However, a new hope for enabling the country to reduce its importing of polyethylene arises following CAP's announcement on Friday that it has secured an investment of up to US$1.7 billion to build its second world-scale integrated petrochemical complex in the country.
Chandra Asri, Indonesia’s largest integrated petrochemical company producing olefins and polyolefins, has selected Thai Oil Public Company Limited (Thaioil) as its chosen strategic investor.
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As disclosed in a press statement, Chandra Asri said it selected Thaioil, the flagship refiner of PTT Public Company Limited (PTT), as its strategic investor after a robust selection process.
The two enterprises have signed definitive agreements to proceed with a capital increase in CAP via a Pre-Emptive Rights Issue, to be filed with the Financial Services Authority of Indonesia (OJK).
Regarding this investment, President Director and Chief Executive Officer of Chandra Asri Erwin Ciputra said it is fully in line with President Jokowi and the government's call to promote self-reliance and import substitutions.
According to Ciputra, it is an exceptional moment for his company, and the proceeds from the rights issue would significantly boost his company's plans to develop its second petrochemical complex, as they gather pace and accelerate towards accepting FID in 2022.
This is part of CAP's core strategy of delivering transformational growth to serve Indonesia's needs, supporting the expansion of its customers, and developing the domestic petrochemical industry, he said.
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Ciputra also said he was pleased to have Thaioil, Thailand's largest refinery, on board as CAP's growth partner, since the partnership would help enhance the security of CAP's feedstock supply and cements its position as Indonesia's leading and preferred petrochemical company.
The investment in CAP will be made via Thaioil's designated subsidiary, which will act as the standby buyer to underwrite a successful transaction.
As disclosed in the press statement, CAP's major shareholders, Barito Pacific and SCG Chemicals Co., Ltd. (SCG Chemicals), support this corporate action to inject equity into CAP.
The transaction also provides opportunities for additional commercial partnerships and growth. CAP has entered into a feedstock sales and purchase agreement with Thaioil for the supply of naphtha and liquefied petroleum gas to CAP and CAP 2, and a product distribution agreement, all on arm's length commercial terms.
Meanwhile, President Director and Chief Executive Officer of PT Barito Pacific Tbk Agus Salim Pangestu said the Barito Group fundamentally believes in growing through partnerships.
"I am delighted to have Thaioil on board as another cornerstone investor in Chandra Asri after a broad and comprehensive Strategic Investor selection process. We are excited about working together to make CAP 2 a reality to create impact beyond returns that build long-term sustainable value for people and communities, in and beyond Indonesia," he said.
This cooperation creates an extraordinary opportunity and environment to realize this vision, he said, adding that he looks forward to the next phase of the journey.
President and Chief Executive Officer of Thaioil Wirat Uanarumit was quoted by CAP's press statement as saying that the partnership with CAP was a significant step for Thaioil and a strategic move for it to further extend its value chain into the olefins petrochemical business.
"I am delighted that we can conclude this partnership with CAP, a premier petrochemical producer, in an attractive market like Indonesia, and to assist CAP in their next stage of growth with the development and
construction of CAP 2," he said.
“The partnership will also be synergistic, with commercial collaborations between CAP and Thaioil, in which Thaioil can supply naphtha from our US$4.8 billion Clean Fuel Project (CFP), which is scheduled to be completed in 2023, and thereby enhance feedstock security for CAP,” he said.
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"I believe this partnership will prosper and will be mutually beneficial to both CAP and Thaioil. We look forward to working closely with CAP to jointly grow the business sustainably and profitably into the future," he said.
President of SCG Chemicals Tanawong Areeratchakul said SCG Chemicals also welcomes Thaioil as a new strategic investor and feedstock partner.
"We fully support CAP and are pleased to co-invest in the development and construction of CAP2. SCG Chemical's decade-long partnership and successful collaboration with CAP, which demonstrates our commitment to Indonesia’s growth," he said.
“SCG Chemicals' investment in CAP2 reaffirms its commitment to Indonesia's long-term prosperity, and looks forward to working collaboratively
with CAP, Barito and Thaioil towards a successful completion of CAP2,” he said.
Investment in CAP 2 is projected to be around US$ 5 billion. Construction is expected to take four to five years, creating 25,000 jobs over the period. It will double the company's production capacity from the current 4.2 million tons a year to more than eight million tons a year.
This will help fulfill Indonesia's growing domestic demand, reduce dependency on imports, develop the country's local downstream petrochemical industry, support the government's vision for Industry 4.0, and create high-value long-term careers, CAP noted in the press statement.
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