Corro-coat to raise P1.5 billion via public offering

Listed powder coatings manufacturer Corro-coat Inc. is eyeing to raise P1.5 billion from the sale of new shares to the public to be used for the purchase of a bio-diesel plant and for working capital requirements.

Stock portal Citiseconline. com said the offering is slated in the fourth quarter of 2006. Asian Alliance Investment Corp. and BancPros Inc. will serve as lead underwriters for the issue.

The biodiesel plant, which is to be acquired at a cost of P810 million, is capable of manufacturing a wide variety of chemical products.

The acquisition of the plant is in line with Corro-coat’s bid to become a biodiesel powerhouse to take advantage of the increasing demand for bio-diesel abroad and locally.

Citiseconline.com’s Carl Sy said the passing of the Biofuels bill, which would mandate the blending of one percent of biodiesel with 99 percent of petrodiesel, could cause demand for biodiesel to reach 40 million liters annually.

While one percent is the initially required pre-blending level under the proposed law, Corro-Coat intends to undertake the promotion of higher usage of bio-diesel for better mileage and emission benefits for vehicular and industrial consumers.

The annual domestic market for biodisel is expected to reach about 70 million liters assuming mandatory use at one percent pre-blending with mineral diesel under the prospective BioFuels Act.

Biodiesel sales in Europe has grown from 1.2 million metric tons in 2001 to 1.9 million metric tons in 2004. Experts estimate that European biodiesel consumption would grow to 5 million metric tons in 2007, 6.5 million metric tons by 2008, and further to 10 million metric tons by 2010.

Biodiesel’s most significant benefit is that it reduces visible smoke and harmful gases released by diesel cars.

Corro-Coat Inc. is acquiring 100 percent of sister company Chemrez Inc. through a share-for-share swap valued at P582.41 million in line with its diversification into the renewable fuels business.

The company’s biodiesel business is expected to constitute 50 percent of total revenues and 66 percent of gross profits, Sy said.

Chemrez owns a P650 million continuous process methyl ester plant which has annual capacity of 60 million liters of biodiesel which can be produced from vegetable feedstock such as coconut oil.

It sells its biodiesel under the BioActiv brand which has found acceptance in several countries such as Germany. Sy said the volatility of oil prices does not affect the cost of production of BioActiv because it does not use crude oil or its derivatives as a raw material. Instead, it uses coconut as a feedstock.

Corro-Coat is looking at Europe as its key potential export market in order to take advantage of the expected huge demand for biodiesel in the next five years.

The new vehicle market in Europe is fast shifting away from gasoline to diesel-engine types as the European Union has committed to reduce carbon dioxide emissions by eight percent between 2008 and 2012 and to require its member-states to use biodiesel in all vehicles starting with an indicative two percent in 2005 to 5.27 percent by 2010.