Sep 3 2007
ICIS news has exclusively revealed that Pakistan's sole polyvinyl chloride (PVC) producer Engro Asahi Polymer and Chemicals, after securing loans of $150m, is finalising an ambitious project that will see the expansion of its PVC plant and the construction of a chlor-alkali complex adjacent to it, a company executive said on Friday.
The remaining $71m for the $221m project is being financed through equity infusion, chief financial officer (CFO) Arshad Ahmed told ICIS news in an interview, adding the company also planned to list on the Pakistan stock exchange.
"Per capita consumption of PVC per year in Pakistan is a mere 0.6kg, far lower than India's 1.16kg, China's 6.8kg and Thailand's 8.43kg and the Middle East's 5.25kg. This shows the growth potential that exists in Pakistan" he said.
"IFC [International Finance Corp] will be injecting $20m equity into the company. Engro Chemicals, Pakistan and Mitsubishi Corp will pump in $25m and $3.5m to increase their equity in the joint venture," he added.
Engro Asahi's 100,000 tonne/year PVC plant, located in Port Qasim, near the coastal city of Karachi, would be expanded by 50% to 150,000 tonnes/year in the third quarter of 2008, he said.
A 150,000-200,000 tonne/year vinyl chloride monomer (VCM) plant, a 200,000 tonne/year ethylene dichloride (EDC) plant and a 100,000 tonne/year caustic soda plant were expected to start up in the first half of 2009, he added.
A 55 megawatt power plant would also be set up to provide captive electricity to the complex, he said, adding ethylene feedstock for the VCM and EDC plants would be sourced from the Middle East through contract agreements.
"We will also have the option to debottleneck the PVC capacity to 200,000 tonnes/year at a later stage depending on market conditions," he added.
Any excess capacity after catering to the domestic market would be diverted to other Asian markets, he said.
"Demand for pipe-grade PVC is projected to grow by 10-12% in 2007, especially in the construction and water supply segments," he said.
However, other grades like wire and cable and window profiles were expected to be introduced into the company's portfolio in the near future, Ahmed said.
Pakistan's consumption of PVC resin in 2006 was estimated to be 100,000 tonnes, with close to 15% of the total demand being met by recycled material and imports.
Engro Asahi supplied the domestic market with 85,000 tonnes last year and expected to increase that volume to 100,000 tonnes this year, Ahmed said.
Engro Chemicals and Mitsubishi Corp currently have 80% and 20% equity respectively in Engro Asahi, following Engro Chemicals' buyout of a 30% stake from Asahi Glass earlier this year.
The main reason for Asahi Glass's divestment was based on its strategic decision to curtail its focus on chloro-vinyl businesses outside Japan, the CFO said.
For the expansion project, Engro Asahi secured its loans of $60m from the IFC and $90m from local banks.