Investments: Lotte Chemical in RM12 bn ethylene supply agreement; ChemOne secures US$350 mn insurance cover for Pengerang project

Lotte Chemical Titan Holding Bhd (LCTH)’s indirect subsidiary PT Lotte Chemical Titan Nusantara (LCTN) has entered into an agreement to buy ethylene worth RM12.69 billion for ten years from another LCTH subsidiary PT Lotte Chemical Indonesia (LCI).

LCTH said LCTN, which makes upstream petrochemical products, is buying ethylene as feedstock for LCTN to produce PE products as part of its ordinary course of business.

LCTN is an indirect 92.5% owned subsidiary of LCTH while LCI is a 51% owned subsidiary. The proposed transaction is deemed as a recurrent related party transaction. 

"The annual quantity to be purchased by LCTN will be 350,000 tonnes where the quantity of ethylene to be purchased will be equal to a quantity of ethylene that is a prorated quantity of the annual volume over 12 months,” LCTH said in a filing with Bursa Malaysia.

It said the proposed transaction is expected to create synergistic effects between LCTN and LCI, including the supply of ethylene from LCI to LCTN, and generate both direct and indirect positive impacts for LCTH Group.

"From a long-term perspective, LCTN is expected to benefit from a more competitive and stable ethylene purchase price due to its proximity in terms of geographical location to LCI, which enables more efficient logistics from both time and cost perspectives compared to sourcing from other import vendors.

"Further, the proposed transaction enables LCTN to secure a sustainable supply of feedstock for its continuing operations,” said LCTH.

In other news, Singapore-based petrochemicals conglomerate ChemOne Group announced that the Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC), a wholly owned subsidiary of the Islamic Development Bank (IsDB), has approved insurance cover of US$350 million for Pengerang Energy Complex (PEC) in Johor, Malaysia.

This insurance, the largest ever project finance support by ICIEC, is structured under a Murabaha financing facility, providing 90% cover on both principal and profit, significantly de-risking the transaction for participating Islamic banks.

The participating banks include National Bank of Kuwait, Qatar National Bank, Al Rajhi Bank Malaysia, and Al Rajhi Bank KSA, with the latter serving as the lead Islamic bank and coordinator to ICIEC.

The IsDB has further reinforced its commitment with a direct investment of US$150 million, bringing its total support for PEC to over US$500 million.

The Pengerang Energy Complex is set to become one of Southeast Asia’s most advanced energy and petrochemical facilities, adhering to international environmental, social, and governance standards. Upon completion, it will significantly enhance regional supply capabilities in aromatics and clean fuels.

The project is expected to create approximately 7,000 jobs during construction and 300 operational roles post-completion, with 80% of these positions filled by Malaysians.

With a projected annual export turnover of us$5 billion, PEC aims to position the Pengerang Integrated Petroleum Complex as a regional oil and gas hub, bolstering Malaysia’s standing in the regional value chain.

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