JG Summit seeks loans for $500-M naphtha cracker plant project

JG Summit Petrochemical Corp. (JGSPC) is holding talks with several multilateral agencies and commercial banks for the possible financing for its $500-million naphtha cracker plant.

Lance Gokongwei, president and chief operating officer of JG Summit Holdings Inc., the parent firm of JGSPC, said negotiations are ongoing and an agreement is expected to be reached anytime soon.

Three foreign groups based in Asia have earlier expressed interest to join JGSPC in the construction of the naphtha cracker facility in Batangas.

A naphtha cracker plant is the grandparent of the entire plastics industry. It converts a crude oil by-product into petroleum products known as monomers used as raw material by the intermediate industries.

The project, which had been given the green light by the Board of Investments (BOI) on pioneer status, is expected to start commercial operation by December 2008 or early 2009 with around 300 employees. A six-year income tax holiday, tax and duty-free importation of capital equipment will be accorded for this project.

JG Summit holds 82.28 percent stake in JGSPC while 17.71 percent is owned by Japan’s Morubeni Corp. Project financing will consist of 30 percent equity contribution and 70 percent loan.

BOI officials said the naphtha cracker plant will be beneficial to the midstream as well as downstream petrochemical industries that have long been dependent on imported feedstock.

The backward integration of JGSPC’s operation will result in combined capacities of the polyethylene plants to 350,000 metric tons (MT) a year from 180,000 MT a year and the polypropylene plants of 185,000 MT a year will be fully utilized.

An integrated petrochemical sector produces the crucial raw materials in making frames for electronics products and home appliances, packages of processed food, pharmaceuticals and a wide range of other manufactured goods, construction materials like PVC pipes, office furnishings, plus plain containers and wrappers.

With prices slightly higher than imports, JGSPC carved out for itself a large slice of the local market and reduced the volume of polyethylene imports the other year to just 27 percent of imports in 1997. In the polyprepylene market, JGSPC has already grabbed 73 percent of the domestic market by offering similar products at prices at par with offers of foreign suppliers.