BP’s petrochemical subsidiary Innovene files for $1 billion IPO
The petrochemical subsidiary of BP Plc, Innovene Inc., has registered for an initial public offering (IPO) on the New York Stock Exchange to raise $1 billion. In 2004, BP decided that it would either sell or float the business.
According to the company’s IPO document — filed with the U.S. Securities and Exchange Commission Monday — the maximum offer value would be $1 billion — but the document also makes clear that the estimate is solely for the purpose of calculating the registration fee. According to the Innovene filing, Goldman Sachs Group Inc., Morgan Stanley, Lehman Brothers Holdings Inc., and UBS AG have been hired to underwrite the NYSE listing.
BP, which is selling shares in the IPO, will receive the proceeds from the IPO, Innovene said. Innovene said it plans to declare a quarterly cash dividend on each common share after the IPO, starting with the first quarter of 2006.
Comments: The IPO of Innovene, one of the world’s largest petrochemical companies, follows a raft of IPOs in the closely-related chemicals sector and could be one of the largest listings on the NYSE this year. The largest so far has been the U.S. chemicals manufacturer and marketer Huntsman Corp., which raised $1.385 billion in February. In January, Celanese Corp., controlled by the Blackstone Group, raised $800 million.
BP announced last year that it would spin off the unit as it focused on its main business of oil exploration and production. In 2004, BP said that it would either sell or float the business. BP has not yet announced what percentage of Innovene would be sold. Analysts had expected BP to float 20-30% of the business, which has been valued at around $6-7 billion. All the shares will be sold by BP PLC. Innovene won’t receive any of the proceeds from the sale, according to the document. No details about the number of shares to be offered, an estimated price range, or the timetable of the IPO were disclosed. The company said it intends to list its common stock on the New York Stock Exchange under the trading symbol INV.
In the last few weeks, there was some speculation about potential bidders trying to acquire full or part of Innovene. The announcement of the IPO suggests that none of the bidders were able to negotiate a deal with BP. It is assumed that BP will provide more details in the following weeks. The IPO is not expected to have any major impact on the operations of the company or the industry.
Innovene is a well-thought-out and well-prepared brain-child of the BP-Amoco groups and should become a benchmark for successful IPOs.
Borealis to invest in the expansion of XLPE capacity in Sweden
Borealis announced its plans to expand its cross-linkable polyethylene (XLPE) capacity in Stenungsund, Sweden to meet the growing demand in the power cable industry for the coming decade.
The company will invest about EUR 42 million to improve its cost competitiveness as part of an integrated PE chain at Stenungsund. The additional capacity is expected to be available during the second half of 2007.
According to the company, growth in power cables is driven by the need for underground solutions in urban and environmentally sensitive areas and to improve the security of supply for example in areas prone to high winds or excessive ice and snow.
Comments: Crosslinked polyethylene is used as insulation material in the following wire & cable applications: (1) low voltage, (2) medium/high voltage, and (3) automotive. The low-voltage applications include insulation in low-voltage (less than 600 volts), mainly used for wiring for office buildings and factories. The bulk of it is used for indoor applications. Insulation in medium to high voltage (600+ volts) applications is used for urban underground power distribution and transmission. In the case of automotive applications, XLPE-based insulation is used for primary wire and battery cable.
The major technical requirements for this application include (1) tree resistance, (2) low dielectric constant, (3) high power factor, (4) low dissipation factor, (5) UV resistance, (6) temperature resistance, (7) processability, (8) flexibility, (9) breakage/crack resistance, (10) filler acceptance, (11) low gel, and (12) consistency. In Europe, Borealis is one of the leading producers of XLPE-based wire & cable products. The demand for XLPE in wire and cable applications is expected to grow at about 3.6% per annum for the next five years.
Taiwan’s Chinese Petroleum Corp. to construct petrochemical complex in UAE
Taiwan’s Chinese Petroleum Corp. (CPC) announced that it will lead a group of Taiwan companies into a $6 billion project to build a petrochemical complex in the UAE.
The plant will be constructed in Abu Dhabi and will include a naphtha cracker with an annual capacity of 1.3 million tons of ethylene. The project will also consist of plants producing 400-500 KT/year of butadiene, 900 KT/year of propylene, and 900 KT/year of polyethylene among other products.
The deal also involves the UAE taking a 20 percent stake in a CPC-led petrochemical plant planned for southern Taiwan, where a 300,000 barrel-per-day refinery and 1.2 million ton naphtha cracker are to be built. Other Taiwan companies that could invest in the project include USI Corp., Taiwan Polypropylene Co., Ltd., Grand Pacific Petrochemical Corp., Taita Chemical Co. Ltd., and Ho Tung Chemical Corp.
Comments: Historically, petrochemical investments in the Middle East have been led by Western companies. Initially, these investments were centered in Saudi Arabia but now have spread to UAE, Oman, Kuwait, and Qatar. With increasing amounts of polyolefin resins being imported from the Middle East into Asia-Pacific as well as increasing crude oil prices, many Asian companies have also started to increase investment activity in the Middle East. The recent announcement by Chinese Petroleum Corp. aims to provide a stronger feedstock position as well as upgrade its assets in Taiwan. Recently CPC has signed a memorandum of understanding with the United Arab Emirates International Petroleum Investment Co. (IPIC) for a refinery and cracker project in Taiwan, in which IPIC will have a 20% stake. CPC plans to build on this partnership by considering investing in a petrochemicals project in the UAE comprised of an oil refinery, cracker, and downstream polyolefins units. CPC also intends to sign long-term contracts with Qatar for liquefied natural gas (LNG).
Currently, CPC imports six million tons of LNG a year from Indonesia and Malaysia. The 25-year contract with Qatar will no doubt improve CPC’s LNG position.
Belgian company Domo to exit chemicals business to concentrate on carpet manufacturing
Belgium-based Domo is quitting the chemicals business to mainly focus on carpet manufacturing. The company will operate its three business units namely: (1) chemicals & polymers, (2) floor coverings, and (3) fibers & yarns on a stand-alone basis until a buyer is found.
Domo has appointed Lazard (London) to advise on selling the chemicals and polymers unit, which will generate sales of about EUR600 million ($728 million) this year, about 60% of the group’s total.
Domo’s chemical operations include a Novolen-process, 180,000 MT/year polypropylene (PP) plant at Rozenburg, the Netherlands; and a caprolactam complex at Leuna, Germany that includes cyclohexanone, hydroxylammonium sulfate, and sulfuric acid units; and phenol and acetone plants. The business also has nylon-6 units at Gent, Belgium; Leuna; and Premnitz, Germany. Domo bought the Premnitz unit last year from Polyamide 2000 AG, a German government-owned project, which was privatized. The chemicals and polymers business employs 600, just over 25% of Domo’s workforce.
Comments: DOMO® was established in 1992 after the integration of the floor-covering companies Eurantex, DOMO® Sint-Niklaas, and Fabelta. The company is one of the largest producers of carpets in Europe. Domo started producing chemicals mainly for its captive usage. In 2001 Domo acquired the PP plant at Rozenburg from Basell.
This was mainly to increase the company’s vertical integration into the raw materials and increase business opportunities. However, currently, about 15% of the output from that plant is used captively and the rest of the product is sold into the merchant market.
Although the chemicals and polymers division has become big for the company, it’s still a relatively small producer of chemicals & polymers. The company has decided to focus on its core business – floor coverings and divest the non-core business – chemicals and polymers.
NOVA Chemicals to manufacture ARCEL® resin in Asia
NOVA Chemicals Corporation announced that it has entered into a long-term agreement with Loyal Chemical Industrial Corporation to manufacture ARCEL® moldable foam resin near Shanghai, China. This agreement is a component of NOVA Chemicals ́ plan to expand manufacturing capacity for ARCEL, a one-of-a-kind expandable inter-polymer, to 100 million pounds (45 KT annually by the end of 2006.
According to the company, ARCEL resin combines the toughness of polyethylene and the processability of polystyrene to yield a uniquely resilient inter-polymer. ARCEL delivers value to the entire supply chain by reducing packaging size, which results in significant space and cube efficiency.
Construction of the ARCEL resin manufacturing facility is underway and production is expected to commence in early 2006
Comments: ARCEL is one of the newest innovations from NOVA Chemicals. NOVA’s Arcel® is regarded as high performance, moldable foam resin that consists of 70% polystyrene (PS) and 30% polyethylene (PE).
Arcel was developed for bodyboards in the mid-80s, as a light, strong foam used for bodyboard cores. Arcel’s property includes tough, flexible, durable foam that is stronger and more water-resistant than polyethylene. Arcel’s other advantage includes resistance to solvents having a high puncture resistance and being 100% recyclable. Arcels applications include infant car seats, automotive dunnage, marine dock bumpers, boogie boards, and model stunt plane. In recent years the demand for Arcel has been increasing due to packaging for items such as computer components and other electronic products. Unlike its polystyrene business, Arcel business has performed quite well, tripling its size over the past couple of years. The new facility in China should allow Nova to take advantage of the growing consumer products and electronics industry which traditionally has had a substantial need for packaging materials. Construction of the Arcel resin manufacturing facility in China is underway and production is expected to commence in early 2006. Arcel is currently produced at NOVA ́s Beaver Valley manufacturing site, where a previously announced capacity expansion is underway.
Dow aligns business portfolios and announces management changes
Dow Chemical Company announced a realignment of its current three portfolios of businesses into two: Basic Plastics & Chemicals and Performance Plastics & Chemicals in order to accelerate the implementation of the company’s long-term strategy.
The company’s strategy for the past decade has been to move to basics- and performance-based business model. The company said that it is accelerating the implementation of that strategy, capitalizing on our historical strengths in low-cost production, as well as our growth and success in innovative, market-driven businesses.
Effective immediately, Liveris announced that:
Phillip H. Cook, Senior Vice President of Performance Chemicals and Thermosets, has been named Corporate Vice President of Strategic Development and New Ventures and will assume responsibility for Strategic Development, New Ventures, and licensing for the company.
Michael R. Gambrell, senior vice president of Chemicals and Intermediates, has been named Executive Vice President for the Basic Plastics & Chemicals Portfolio. Together with Liveris and other members of the OCE, he will accelerate the development of low-cost feedstock positions in key geographies. The focus of Gambrell’s portfolio will be leveraging Dow’s competitive advantages in plant integration, operational excellence, product and process technology, low-cost feedstocks, and joint ventures.
Romeo Kreinberg, senior vice president of Plastics, has been named Executive Vice President for the Performance Plastics & Chemicals Portfolio. Together with Liveris and other members of the OCE, he will accelerate the company’s strategy to preferentially invest in Performance Businesses, which are less cyclical and provide a solid base of earnings throughout the industry cycle.
Pemex cuts back on the Phoenix project
Pemex Petroquímica SA, Mexico’s state-run petrochemical company, has reduced the size and cost of its Phoenix project.
Pemex decided to expand two plants in Morelos and Cangrejera. The project would expand total annual ethylene production from 1.3 billion pounds to about 2 billion pounds and increase polyethylene and polypropylene production by an undisclosed amount. The estimated cost of the project would drop from $2.7 billion to $840 million, according to the Dow Jones story.
The Phoenix Project is designed to make use of existing Mexican national resources and reduce the country’s reliance on imported materials. Pemex’s partners in the project are Grupo Idesa SA de CV of Mexico City, Indelpro SA de CV of Monterrey, Mexico, and Nova Chemicals Corp. of Pittsburgh. Indelpro is a joint venture between PP giant Basell NV and Mexican conglomerate Alfa Group.
Comments: The scaling back of the Phoenix project should not come as a real surprise to anyone who has followed the project. It was well known that the basis for the original project was a “subsidized” feedstock advantage that in effect would protect the base investment of the major partners. Press reports in recent months have abounded that the Mexican treasury was not going to agree with a PEMEX discount feedstock like projects in the Middle East have enjoyed. The reason is twofold based on the project’s anticipated consumption of light natural gasoline fractions as feedstocks.
First, Mexico’s gasoline market is growing rapidly and secondly, with the US markets so close in the Gulf Coast, the alternate value of these feedstocks was related closely in the market to US postings. With these economic alternate values so solidly in place, it was difficult to divert the Phoenix project’s feedstocks at a discount since there was not a substantial location differential to other markets. The notion that this is a huge setback for Mexico’s petrochemical markets is true, demand growth is far outstripping local supply and the newly scaled project will not fill the gap in most all base derivatives.
Qatar Vinyl Company considers expansion of EDC capacity in Qatar
Qatar Vinyl Co. announced that it is studying plans to increase ethylene dichloride (EDC) and chlorine capacity at Mesaieed.
According to the company, the project could cost about $500 million, depending on its eventual scope. QVC can produce 300,000 MT/year of chlorine, 200,000 MT/year of EDC, and 300,000 MT/year of vinyl chloride monomer (VCM). It exports VCM mainly to three separate customers in Australia, India, and Pakistan. Hydro Polymers owns the rights to market 40%-50% of the plant’s output.
The expansion would consist of a membrane-process 300,000 MT/year chloralkali plant and a 400,000 MT/year EDC facility. QVC will need to secure additional ethylene supplies, which could be purchased from Qapco or a jv of Chevron Phillips Chemical, QP, and Total Petrochemicals. The JV is building a 1.3-million MT/year ethane cracker at Ras Laffan, Qatar.
According to QVC, the final cost will depend on the price of electricity needed to supply the complex. And that the completion is expected in about 2010. QVC is debottlenecking its VCM plant to about 340,000 MT-360,000 MT/year for completion at the end of 2006.
Comments: Qatar Vinyl Company (QVC) was established in 1997 as a limited Qatari shareholding company. The company, located in Mesaieed Industrial City, was inaugurated in 2001 by H.H. the Emir, Sheikh Hamad Bin Khalifa Al-Thani. Shareholders are Qatar Petroleum (25.5%), QAPCO (31.9%), Norsk Hydro (29.7%), and Atofina (12.9%).
The demand for PVC is growing globally at about 4% per annum, with higher growth in Asia, especially China. China is building significant PVC capacity over the next five years but still will need to import VCM, the monomer for PVC production. With the advantages of feedstock, the Middle East will be able to provide a cheaper source of EDC and hence VCM.
LG Chem to stop polyacetal production in South Korea
LG Chem announced its plans to discontinue production of its Lucel® polyacetal line products effective from September 2005. According to the company, the decision to close the 15 KT/year operation is based on increasing utility costs as well as the high oil price.
The employees and assets will be redeployed and LG Chem will work with customers to supply for a further three months from available stocks. LG Chem will maintain a supply of compounded Lucel based on purchased resins. In the UK, LG International is able to supply Kolon polyacetal from another Korean supplier.
Comments: Polyacetal resins were first produced in 1960 by DuPont under the name Delrin®. The major advantages of these engineering thermoplastics include: (1) good hardness, (2) strength, (3) stiffness, (4) exhibit good lubricity, (5) good fatigue resistance, (6) a low coefficient of friction, and others.
The major applications of polyacetals include (1) automotive, (2) electronics/electrical, (3) industrial, (4) consumer applications, (5) appliances, and others. The major producers include (1) DuPont, (2) Ticona, (3) BASF, (4) Asahi, (5) Formosa, and others. LG Chem has taken a strategic decision to exit from businesses that are non-core or less profitable.
Rhodia Polyamide becomes the first European producer of polyphenylene sulfide (PPS) staple fibers
Rhodia Polyamide announced the launch of new Polyphenylene Sulfide (PPS) staple fibers based on Ticona’s Fortron® PPS polymer. This partnership allows Rhodia Polyamide to become the first European producer to offer PPS staple fibers.
According to the company, these fibers are specially designed for applications needing high-temperature stability, broad chemical resistance, stiffness, strength, and creep resistance at elevated temperatures.
Staple fibers are manufactured by melt spinning process in Rhodia’s Neumünster plant, Germany, where a strict quality management system is applied according to the standards of ISO 9001:2000. Processes and products are continuously supervised by several online devices. In addition, quality is controlled by laboratory chemical and textile testing. The Neumünster plant also produces high-grade polyamide 6, 6.6, and 6.10 staple fibers for a variety of highly demanding technical applications.
Filter media are typical applications for PPS staple fibers as they require a combination of high temperature, chemical, and hydrolysis resistance. PPS staple fibers are also utilized in applications where flame-retardancy is essential and are often used for hot gas filtration in diverse sectors such as power generation, stone and cement, and chemical and allied industries.
Comments: Polyphenylene sulfide (PPS) is a semicrystalline material that offers an excellent balance of high-temperature resistance, chemical resistance, flowability, dimensional stability, and electrical properties. PPS can be loaded with reinforcement fibers and fillers for injection molding. Because of its low melt viscosity, PPS can be loaded as high as 70% with a variety of fillers and reinforcements. PPS, which can be compounded or reinforced, is usually injection molded.
PPS fiber is a high-performance material that excels at heat resistance, chemical resistance, and flame retardancy and is a material of choice for response to the environmental problems caused by dioxin. PPS fibers are used for various applications ranging from building materials to apparel. Major applications include coal boilers at coal thermal power stations, dust chamber filters for use in incinerators, and hosiery.
PPS fiber filters have been highly rated for use in coal-fired boilers and municipal incinerators. In recent years, the use of low-temperature incinerators in metropolitan areas has been promoted due to concerns that existing incinerators fail to eliminate dioxin, a highly toxic chemical. PPS fiber is receiving increasing attention because of its well-balanced, high-performance properties, including heat and acid resistance. For example, in Japan, dioxin produced by incinerators has become a serious social issue.
Under government direction, industries are working to collect particulates at lower temperatures in incinerators. In all the countries with regulations or concerns related to dioxin, PPS fibers have potential. PPS fiber applications are rapidly expanding throughout the world, mainly for use in heat-resistant bag filters.
Currently, demand is centered on the European and the U.S. markets with projected growth rates of 7%-8%. Worldwide PPS fiber demand currently stands at approximately 1,400 tons per year. The market is shared by the United States (approximately 25%), Europe (approximately 50%), Japan and Asia (approximately 17%), and Australia (approximately 8%).
Toray is one of the major suppliers of PPS fiber. The company started participating in this market in 1997. In 2001 Toray Industries, Inc. acquired the polyphenylene sulfide fiber unit of American Fibers & Yarns Company. The acquisition boosted Toray’s share of the worldwide PPS fiber market to more than 60 percent. Rhodia after the launch of new PPS fibers become the first European producer of PPS. Rhodia’s participation in this market could impact Toray’s market share in the PPS fiber market in Europe.
DuPont and Tate & Lyle joint venture to construct a new facility to produce 1,3 propanediol – the raw material for Sorona®
DuPont and Tate & Lyle announced that they will construct a new plant in Tennessee to produce 1,3 propanediol using corn-based feedstock for DuPont’s Sorona range of textiles and plastics.
The two companies formed a joint venture to build the new $100m (E80m) plant now under construction using corn to make 1,3 propanediol (PDO), a key ingredient in the Corona range. Energy usage for the process is up to 40% less than making the chemical via an oil-based process, the partners said.
Comments: In 2004, DuPont and Tate & Lyle PLC formed a joint venture to create products from renewable resources such as corn for numerous applications including clothing, interiors, engineered polymers, and textile fibers. The joint venture is actively involved in the development of a process to produce 1,3 propanediol (PDO), the key building block for DuPont™ Sorona® polymer. With the increasing oil prices, the cost of producing PDO via renewable resources may be cost-effective.
EC investigates methyl methacrylate cartel
The European Commission charged methyl methacrylate producers in a conspiracy to fix prices for the monomer, which is used to make acrylic products such as signs, lighting fixtures, and shower enclosures. The companies include (1) ICI, (2) Degussa, (3) BASF, and others. The companies are cooperating with the EC.
ICI, one of those being investigated, said it will study the statement before providing a written response to allegations covering the period from 1995 until it sold the business in 1999. The methacrylates cartel is alleged to have been in place between 1995 and 2003.
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