KUALA LUMPUR: Lotte Chemical Titan Holding Bhd

’s (LCTH) indirect subsidiary PT Lotte Chemical Titan Nusantara (LCTN) has entered into an agreement to buy ethylene worth RM12.69 billion for 10 years from another LCTH subsidiary PT Lotte Chemical Indonesia (LCI).

LCTH said LCTN, which makes upstream petrochemical products, is buying ethylene as feedstock for LCTN to produce polyethylene products as part of its ordinary course of business.

LCTN is an indirect 92.5 per cent-owned subsidiary of LCTH while LCI is a 51 per cent-owned subsidiary. The proposed transaction is deemed as a recurrent related party transaction. 

"The annual quantity to be purchased by LCTN will be 350,000 metric tonnes where the quantity of ethylene to be purchased will be equal to a quantity of ethylene that is a prorated quantity of the annual volume over 12 months,” LCTH said in a filing with Bursa Malaysia today.

It said the proposed transaction is expected to create synergistic effects between LCTN and LCI, including the supply of ethylene from LCI to LCTN, and generate both direct and indirect positive impacts for LCTH Group.

"From a long-term perspective, LCTN is expected to benefit from a more competitive and stable ethylene purchase price due to its proximity in terms of geographical location to LCI, which enables more efficient logistics from both time and cost perspectives compared to sourcing from other import vendors.

"Further, the proposed transaction enables LCTN to secure a sustainable supply of feedstock for its continuing operations,” said LCTH. - Bernama