PETRONAS CHEMICALS GROUP BERHAD (459830‐K) RELATED PARTY TRANSACTION
1.0 INTRODUCTION Pursuant to Paragraph 10.08 (1) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, the Board of Directors of PETRONAS Chemicals Group Berhad (“PCG” or “the Company”) wishes to announce that the Company has entered into a Related Party Transaction ("RPT") with PETRONAS Refinery and Petrochemical Corporation Sdn Bhd (“PRPC”) where the consideration of such RPT has exceeded the percentage ratio of 0.25% but is less than 5%.
2.0 TRANSACTION PCG has acquired from PRPC, a wholly owned subsidiary of Petroliam Nasional Berhad (“PETRONAS”), the entire equity in three companies namely PRPC Glycols Sdn Bhd, PRPC Polymers Sdn Bhd and PRPC Elastomers Sdn Bhd (“Project Companies”). The Project Companies will undertake petrochemical projects which are part of the Refinery and Petrochemicals Integrated Development (“RAPID”) project in Johor, Malaysia. PCG will pay PRPC a consideration of RM13,000, based on a willing buyer and willing seller basis, being the paid up share capital of the Project Companies. With this acquisition, PCG will assume the assets and the liabilities of the Project Companies amounting to approximately USD110 million. With the above transaction, the Project Companies will become wholly owned subsidiaries of PCG. However, based on current arrangements between PRPC and its existing partners, there may be potential dilution to PCG’s equity in the Project Companies. The payment for the paid up capital in the Project Companies of RM13,000 is expected to be paid to PRPC on 3 November 2015 while the liabilities of the Project Companies of USD110 million is expected to be settled by the respective Project Companies before the end of the year. Further information on PETRONAS, PRPC and the Project Companies is set out in Table A. 3.0 RATIONALE The acquisition provides PCG the opportunity to accelerate its strategy in achieving its vision and maximizing PCG’s shareholder value by strengthening its position as a petrochemical market leader in South East Asia. The acquisition supports both parts of PCG’s two‐pronged strategy by firstly increasing capacity of the existing product portfolio and expanding volumes to strengthen PCG’s existing market position; and secondly by diversifying PCG’s product portfolio further into differentiated and specialty chemicals. Participation in the RAPID project will give PCG a competitive advantage as it can benefit from a high degree of integration within and across the RAPID project facilities, as well as its close proximity to the high growth ASEAN market.
4.0 INTERESTED DIRECTORS I MAJOR SHAREHOLDERS Interested Directors Relationship Encik Md Arif Bin Mahmood Encik Md Arif Bin Mahmood is the Non‐Executive Chairman and is an appointee of PETRONAS. He is a Board Member of PETRONAS and sits on the Boards of several PETRONAS Group of Companies. He is also the Executive Vice President/Chief Executive Officer of PETRONAS Downstream Business. Datuk Sazali Bin Hamzah Datuk Sazali Bin Hamzah is an appointee of PETRONAS. He is the President/Chief Executive Officer of PCG and sits on the Boards of several PETRONAS Group of Companies. Zakaria Bin Kasah Zakaria Bin Kasah is an appointee of PETRONAS and sits on the Boards of several PETRONAS Group of Companies. Freida Binti Amat Freida Binti Amat is an appointee of PETRONAS and sits on the Boards of several PETRONAS Group of Companies. Interested Shareholder Relationship Petroliam Nasional Berhad PETRONAS is the major shareholder of the Company with (PETRONAS) equity of 64.35%. All directors nominated by PETRONAS abstained from voting during deliberation of the transaction at the Board of Directors’ meeting held today. Save as disclosed above, no other directors and/or major shareholders of the Company and/or persons connected with them have any interest, whether directly or indirectly in the RPT.
5.0 FINANCIAL EFFECTS The time of completion of the transaction is 3 November 2015. The transaction does not have any effect on the issued and paid up share capital of PCG and does not have any material effect on the earnings or the net assets of the Group at the transaction date. The maximum percentage ratio for the transaction is 1.8% at the transaction date. The Project Companies are currently undertaking projects with a future total investment cost for the polymers, glycols and elastomers segments of approximately US$3.9 billion with a combined total capacity of approximately 2.7 million tonnes per annum (2.7 mtpa). The project is expected to contribute positively to both future revenue and earnings. First petrochemicals production is expected to commence after the completion of the PRPC refinery, which is scheduled in 2019. Upon completion of the transaction and undertaking of the projects, PCG will assume the benefits and risks of the petrochemical projects. The benefits and risks, as in any other petrochemical project are subject to market conditions, project execution, and other typical industry risks.
6.0 STATEMENT BY BOARD AUDIT COMMITTEE PCG’s Board Audit Committee has reviewed the terms of the transaction and is satisfied that the terms are fair, reasonable and on normal commercial terms; not detrimental to the interest of the Company's minority shareholders; and in the best interest of PCG.
7.0 STATEMENT BY DIRECTORS PCG Board (save for the Interested Directors) believes that the acquisition of the Project Companies can accelerate the realization of PCG’s vision by increasing its capacity, revenue as well as value and that the transaction is to the best interest of the company.
8.0 APPROVALS REQUIRED The transaction is not subject to the approval of shareholders of PCG or any relevant authorities.
For and on behalf of the Board PETRONAS Chemicals Group Berhad Datuk Sazali Hamzah President/Chief Executive Officer
Kuala Lumpur, 3 November 2015
Table A I.
Information on PETROLIAM NASIONAL BERHAD (“PETRONAS”) PETRONAS was established pursuant to the Malaysian Petroleum Development Act, 1974 to own and manage the petroleum resources of Malaysia. The Company was incorporated under the Malaysian Companies Act, 1965 on 17th August 1974. PETRONAS, together with its subsidiaries and associated companies, has fully integrated multinational oil and gas operations along the hydrocarbon value chain. PETRONAS Refinery and Petrochemical Corporation Sdn Bhd (“PRPC”) PRPC was incorporated on 21 May 2013 and is a wholly‐owned subsidiary PETRONAS an authorized capital of RM10,000,000,000.00 of RM1,000 each and a paid up capital of RM526,478,000.00 which consists of 483,007 ordinary shares at RM1,000 each and 43,471 redeemable preference shares of RM1,000 each. The company’s principal activity is in relation to the development of refinery, steam cracker, petrochemicals, utilities and infrastructure within Pengerang Integrated Complex in Mukim of Pengerang, District of Kota Tinggi, Johor. Information on PRPC Glycols Sdn Bhd (“Glycols”)
a) This company was incorporated by PETRONAS on 26 January 2015 with an authorized capital of RM400,000 of RM1,000 each and a paid up capital of RM4,000 which consists of 4 ordinary shares at RM1,000 each. b) The company’s principal activity is to manage and operate the glycols complex located in the RAPID complex. c) The operation of the glycols complex is also supported by the associated facilities in Pengerang Integrated Complex (“PIC”) for the nitrogen, steam, power, and water. IV.
Information on PRPC Polymers Sdn Bhd (“Polymers”) a) This company was incorporated by PETRONAS on 26 January 2015 with an authorized capital of RM400,000 of RM1,000 each and a paid up capital of RM4,000 which consists of 4 ordinary shares at RM1,000 each. b) The company’s principal activity is to manage and operate the polymers complex located in the RAPID complex. c) The operation of the polymers complex is supported by the associated facilities in PIC for the nitrogen, steam, power, water, including storage terminals and other related infrastructure.
Information on PRPC Elastomers Sdn Bhd (“Elastomers”)
a) This company was incorporated by PETRONAS on 26 January 2015 with an authorized capital of RM400,000 of RM1,000 each and a paid up capital of RM5,000 which consists of 5 ordinary shares at RM1,000 each. b) The company’s principal activity is to manage and operate the elastomers complex located in the RAPID complex. c) The operation of the elastomers complex is similarly supported by the associated facilities in PIC for the nitrogen, oxygen, steam, power, water and infrastructure.