KUALA LUMPUR (Oct 28): Lotte Chemical Titan Holdings Bhd (LCT) has awarded two contracts worth US$1.64 billion (RM6.83 billion), involving engineering and construction work on an integrated petrochemical facility in Indonesia, to Lotte Engineering & Construction Co Ltd (LEC).

In a bourse filing, LCT said the two conditional letters of award (LOA) were issued by its Indonesia-based subsidiary PT Lotte Chemical Indonesia (LCI).

LCI is the project owner of the petrochemical facility known as the Lotte Chemical Indonesia New Ethylene (LINE) project.

LEC, meanwhile, is a 43.8% associate of Lotte Chemical Corporation, which is a major shareholder of LCT.

The first LOA is an onshore award, whereby LEC is to construct and deliver to LCI the completed petrochemical plants, buildings and facilities for part of the LINE project for a contract sum of 10,748.7 billion rupiah (US$755 million or RM3.13 billion).

The second LOA is an offshore award, whereby LEC is to undertake the engineering and supply of equipment, materials, supplies, systems required and spare parts, for a contract sum of US$890.6 million (RM3.7 billion).

LCT said the LINE project is part of the group’s plan to expand its business operations in Indonesia, through the development of an integrated petrochemical facility.

The project will comprise, among others, the development of various petrochemical plants on 264.82 acres of land in Merak, Cilegon, Banten province, all of which are within the vicinity of the existing three polyethylene plants of PT Lotte Chemical Titan Nusantara, a subsidiary of LCT.

In addition, the LINE project includes the development of a cracker plant which will use naphtha and liquefied petroleum gas as its feedstock to produce, among others, 1,000 kilo tonnes per annum (KTA) of ethylene (EL) and 520 KTA of propylene,  and other various petrochemical plants and facilities.

LCT said the EL produced from the cracker plant is expected to provide the existing plants in Indonesia with a stable supply of feedstock.

LCT added that the development cost of the LINE project after excluding the deferred plants is expected to be paid in cash, funded via a combination of equity (40%) and debt financing (60%).

The group said the LINE project is part of its plan to expand its production capabilities and capacity in Indonesia.

The LINE project is also expected to provide synergistic benefits to the group’s existing business operations in Indonesia, as the new plants and facilities of the LINE project will be developed within the vicinity of the group’s existing PE plants in Indonesia.

“LCT believes that the development of the LINE project represents an opportunity for the group to further enhance its value to its shareholders through organic expansion. 

“The LINE project is expected to further strengthen the group’s position in the Indonesian market and potentially allow the group to capture a larger market share, further solidifying the group’s plans to be a top-tier petrochemical company in Southeast Asia,” it added.

The group said the proposed award is expected to be completed by the first quarter of 2022.

LCT's share price closed 11 sen or 4.01% lower at RM2.63 on Thursday, valuing the group at RM5.99 billion. The counter saw 14.63 million shares transacted.