By James A. Loyola
JG Summit Holdings, Inc., the flagship of the Gokongwei family, is investing an additional $700 million for the expansion of its petrochemicals business through subsidiary JG Petrochemical Corporation.
In an interview after the firm’s annual stockholders’ meeting, JG Summit President Lance Gokongwei said this will boost their total investment in the petrochemicals business to $2.2 billion.
“We’re preparing the invitations to bid so we expect, basically, to award all the major packages (engineering, procurement, and construction contracts) by the end of the year,” he said adding that “we hope to be operational by 2021.”
Gokongwei said the expansion consists of five projects. “One is the expansion of our naphtha cracker. The second is the expansion of our polypropylene plant. The third is a brand new polyethylene factory. The fourth is an aromatics factory. The fifth is a butadiene plant,” he said.
“The projects will increase the naphtha cracker capacity by 50 percent. We’re also increasing the polypropylene by 50 percent, and we’re putting in a new polyethylene, new butadiene and new aromatics factory,” Gokongwei explained.
The funding for the expansion will be from the free cash flow of the existing petrochemicals business plus some borrowings.
Gokongwei said “most people project that petrochemical demand will grow one and a half times GDP so we are hoping that polymer demand will continue to grow 9 to 10 percent in the Philippines and in the region… we think we’ll be able to have a world class cost structure to compete in this business.”
JG Summit is allotting P48.2 billion for capital expenditures this year, higher than the P41.9 billion spent in 2016 with its airlines unit spending about P18 to P20 billion, P7 billion for the food business, P15 billion for the property business, “a few hundred million” for its bank and the balance for the petrochemicals unit.
Gokongwei said they aim to boost the growth of their banking which is aiming to have assets of P200 billion by 2020 from the current P80 billion.