LC Titan’s LINE project to undergo land preparation work

This article first appeared in The Edge Financial Daily, on March 19, 2019.
-A +A

KUALA LUMPUR: Lotte Chemical Titan Holdings Bhd’s new petrochemical project in Cilegon, Indonesia, dubbed Lotte Chemical Indonesia New Ethylene (LINE), will undergo land preparation work for 1.31 trillion rupiah (RM377.16 million).

The job will be undertaken by its sister company, Lotte Engineering & Construction Co Ltd (LEC), with Indonesian construction firm Hans Enjiniring dan Konstruksi (HEK) at the above contracted value. LEC is 43.79%-owned by Lotte Chemical Corp, the major shareholder of Lotte Chemical Titan.

The group’s wholly-owned unit, PT Lotte Chemical Indonesia, inked the land preparation contract with LEC and HEK last Friday. The contract is regarded as a related-party transaction due to LEC’s involvement.

The announcement on Bursa Malaysia yesterday came after the group’s ground-breaking ceremony for the LINE project on Dec 7. At the time, Lotte Group’s chairman said the successful implementation of the LINE project, in which the group would be investing at least US$3.5 billion according to news reports, would be a significant milestone for the Lotte Group and the company’s plans to be a top-tier petrochemical company in Southeast Asia.

Constructing the LINE project, including a naphtha cracker and a large-scale petrochemical complex producing downstream products, is expected to commence in 2019 or 2020, and to be completed in 2023.

“The total contract price [and consequently, the transaction value] is based on the most competitive quotations received from LEC and unrelated third parties for similar services,” said Lotte Chemical Titan in its Bursa filing yesterday.

Pursuant to a joint operation agreement dated Oct 15, 2018, Lotte Chemical Titan said LEC will have a 70% participating interest in the project, and HEK the remaining 30%. “As such, the the contract’s total value attributable to LEC at a 70% participation pursuant to the joint operation agreement is 919.901 billion rupiah or RM264.01 million,” it said.