IRPC Plc and PTT Global Chemical Plc (PTTGC), two major petrochemical arms of national energy conglomerate PTT Plc, have resumed merger plans as part of the parent's strategy of combining all core business units into one big subsidiary.
IRPC president Sukrit Surabotsopon yesterday confirmed a possible merger was back on the table.
A feasibility study will be conducted in the second half of next year after IRPC completes its major Upstream Project for Hygiene and Value-Added Products (UHV).
The 30-billion-baht UHV project will process refinery products into feedstock for petrochemicals, which will add an extra US$2-4 a barrel on refinery capacity of 215,000 barrels per day.
It will also increase the proportion of high-value production, while the refinery's fuel oil margin will decline to 8% from 20-30%.
"The UHV project is basically an overhaul of the entire production process, resulting in big improvements in our production and efficiency. So if we conducted a feasibility study now, it would not present a clear picture since our large investment project is incomplete," said Mr Sukrit.
"We also have to wait to see what sort of synergy they'll have with PTTGC and how it reflects our actual value."
Once the UHV project is completed, the two companies will conduct a joint feasibility study to determine whether the potential synergy creation between these two would justify a merger, said Mr Sukrit.
He said if the study found synergy from the merger would not be feasible commercially, the plan would be scrapped. The feasibility study will be completed in 2016 at the earliest.
The suggestion of merging IRPC and PTTGC is not new, as the parent firm PTT has long wanted to merge its core business units into a single subsidiary.
Previously, three petrochemical arms and an oil refinery were eventually all merged to form PTTGC, which is now an industry leader in Asean.
IRPC was considered for inclusion in that merger plan, but due to its incompatibility with the three other firms in terms of production technology, capacity size, product types and financial structure, PTT executives decided to create PTTGC without it.
But now that IRPC has improved and upgraded its operation, balance sheet, production and performance, the plan has been resumed.
IRPC shares closed yesterday on the Stock Exchange of Thailand at 3.42 baht, unchanged, in trade worth 126 million baht.
PTTGC closed at 61.25 baht, down one baht, in trade worth 339 million baht.
