How Business Transformation Drives Chandra Asri Group’s Growth
The Jakarta Globe
September 17, 2024 | 6:06 am
(Photo Courtesy of Chandra Asri Group)
Jakarta. PT Chandra Asri Pacific Tbk, also known as Chandra Asri Group, has been aggressively expanding to various business sectors since late 2022.
The company has now transformed into a holding in the chemical and infrastructure sectors. Its infrastructure business encompasses energy, water as well as jetty & tank farm processing. This infrastructure business also complements the company’s petrochemical business which it has previously focused on.
Chandra Asri Group, also known by its ticker symbol TPIA, is now turning 32. TPIA has become not only the largest petrochemical company in the country, but it has also become a corporation with a vast business portfolio. This expansion is expected to pave the way for a stronger growth as it seeks to serve the country.
As part of its business transformation, the company has changed its name from PT Chandra Asri Petrochemical Tbk to PT Chandra Asri Pacific Tbk. The Law Ministry has approved the name change on January 3, 2024. They have also secured shareholder approval at an extraordinary general meeting on December 29, 2023. This name change becomes a strategic step for the company to accommodate a broader and more diversified business focus. It also strengthens the company’s image as a growth partner that plays a role as the backbone for strategic sectors in the country.
Chandra Asri Group’s business transformation journey began with the purchase of 70 percent of PT Krakatau Daya Listrik shares (which later changed its name to PT Krakatau Chandra Energi/KCE). As well as 49 percent shares of PT Krakatau Tirta Industri (KTI) worth a total of Rp 3.24 trillion from PT Krakatau Sarana Infrastruktur (KSI), a subsidiary of PT Krakatau Steel Tbk (KRAS). In February 2023, KSI officially closed the transaction for the conditional shares and purchase agreement (CSPA) with the Chandra Asri Group.
Chandra Asri Group’s president director Erwin Ciputra said that the company’s programmatic merger-and-acquisition (M&A) strategy could drive sustainable business growth. The acquisitions had also been supported by a stable and resilient cash flow.
"This strategy further enhances our business fundamentals and opens up many interesting synergies, including for income diversification in supporting utilities and in line with the expansion plan for the second petrochemical complex and world-scale downstream industries," Erwin said.
According to Erwin, the synergy is expected to have an economic impact for stakeholders and improve public services. For instance, it can help provide electricity and clean water for industries in the Cilegon area. As business grows, it can also open up job opportunities.
Basic Chemical Project
Last April, Chandra Asri Group and the country’s sovereign wealth fund Indonesia Investment Authority (INA) inked a memorandum of understanding (MoU) on the development of a world-class chlor-alkali and ethylene dichloride plant (CA-EDC) plant in Indonesia.
INA alongside other potential foreign investors will explore the possibilities of purchasing PT Chandra Asri Alkali (CAA) shares. CAA is Chandra Asri Group’s wholly owned subsidiary that is dedicated to being a special-purpose vehicle to invest in the plant’s construction. The plant will produce over 400,000 metric tons of caustic soda (sodium hydroxide) annually. It is also set to produce 500,000 metric tons of ethylene dichloride (EDC) per year. To speed up the plant’s construction, Chandra Asri Group has signed a basic engineering and licensing agreement with Asahi Kasei Corporation (AKC) from Japan, a Japanese licensee with advanced intellectual property for the construction of a world-scale chlor-alkali plant.
According to Erwin, the CA-EDC will help meet the increasing needs for caustic soda and EDC in Indonesia and Southeast Asia.
Caustic soda is an important raw material for the downstream industry that continues to grow in Indonesia. This includes alumina and nickel extraction, water treatment, as well as the production of textile, pulp, paper, soap, and detergent. EDC is a mainstay ingredient for intermediate chemicals for the production of polyvinyl chloride (PVC), a common material in various end product applications including construction and packaging.
In May 2023, the company through CAA inked a license, basic engineering, and technical services deal with an American vinyl tech licensor to establish an EDC plant.
Chandra Asri Group also wants to seize opportunities in the electric vehicle (EV) ecosystem. Through CAA, the company --alongside PT Indonesia Asahan Aluminium (Inalum)-- inked a letter of intent (LoI) last October. The deal is related to the domestic processing of Indonesian aluminum with an aim to support the country’s EV ecosystem. As part of the deal, CAA is expected to provide up to 120,000 metric tons of wet caustic soda to Inalum annually. There is also the possibility for an up to 10 percent equity participation by Inalum in CAA.
Inalum will use the wet caustic soda in its aluminum processing at the smelter facility, including as an EV battery pack component.
TPIA and BCI Minerals Limited also earlier this year inked an offtake agreement. Chandra Asri Group will use salt produced at the Mardie Project for the chlor-alkali plant that is being developed in Indonesia. The annual salt contract volume hits 300,000 tons in the first year, and will rise to 600,000 tons in the second and third years as the project progresses. This agreement will contribute to the fulfillment of the offtake requirements needed as a prerequisite for the disbursement of BCI debt facilities.
The CA-EDC plant is currently waiting for the environmental impact assessment as part of the company’s compliance with the existing laws in Indonesia.
Energy Infrastructure
In June 2023, Chandra Asri Group took corporate action by expanding its business in the energy infrastructure sector by investing up to $200 million in PT Krakatau Posco Energy. KCE undertook this corporate action in two phases.
In the first phase, KCE will raise its ownership in KPE, a joint venture (JV) with steelmaker Posco, to 45 percent. The second phase sees KCE making joint investments in accordance with its shareholding to support KPE's expansion plan to build a new power plant with a capacity of 200 megawatts (MW) after the final investment decision is taken.
Under a normal growth path, KCE's total power plant capacity will increase to 300 MW. This consists of the 120 MW generated by previously owned combined power plants. The remaining 180 MW comes from its shareholding in KPE after the planned investment expansion (45 percent of 400 MW).
Chandra Asri Group said at the time of the announcement that KPE owned a power plant and supporting infrastructure utilities with a capacity of 200 MW. Its operations use exhaust gas from Krakatau Posco and are supported by a long-term full offtake agreement contract that is valid until 2038.
"This step strengthens our commitment to deepen strategic partnerships and strengthen our position as a major investor in the energy sector. We are pleased to be able to open a clear synergy that is reflected in the successful acquisition of KCE by a subsidiary of PT Chandra Daya Investasi (CDI) in February 2023," said Erwin.
Last December, KCE set up a solar panel development business with four different mechanisms. The company has installed solar panels in many projects, including industry and retail, with a total renewable energy-powered electricity capacity of 958 kW. There are also targets to have a 3 MWp solar power plant project by 2023.
These solar panels have bore fruits for both the customers and businesses. It can save annual electricity consumption by up to 40 percent and cut up to 561 tons of CO2 or carbon emissions a year. This is part of the KCE’s strategies to help the government’s efforts in boosting the nationwide renewable energy use.
Innovation and Strategic Partnership for Added Value of Petrochemical Business
Last August, Chandra Asri Group and BRI inked a MoU related to the financing facilities for the former’s domestic polymer customers. This was also the first time BRI launched a financing scheme specifically designed for the petrochemical industry. The financing facilities aimed to increase the volume of wholesale transactions while supporting Indonesia's focus on domestically processing its natural resources.
This collaboration is also expected to support the competitiveness of the industrial value chain, encourage supply chain stability, and provide added value to national petrochemical products.
"The collaboration between Chandra Asri Group and BRI is an appreciation for our customers who have chosen domestic products to support their businesses," Chandra Asri Group's polymer sales director Raymond Budhin said.
In October 2023, Chandra Asri Group secured the International Sustainability and Carbon Certification (ISCC). This is a global sustainability certification system on the production of environmentally friendly products. The ISCC means that Chandra Asri Group's petrochemical plant facilities are now certified to meet the standards for processing bio-feedstock into bio-based products, such as bio-propylene, bio-ethylene, bio-crude C4, and bio-pygas.
In end-2023, Chandra Asri Group provided raw materials for the Cirata floating solar power plant to help the latter meet its local content requirement. The floats in this project are specially designed to withstand the load of solar panels, electrical components, and other related equipment to ensure safe and reliable operations. The floats use Chandra Asri Group's HD Blow UB5206H resin.
Floaters provide the buoyancy needed for the solar panels to float on the water's surface. They also prevent the solar panels from sinking, adapt to changes in water levels, and provide stability so that the solar panels do not roll over or flip over.
The floating solar plant is the largest of its kind in Southeast Asia as it boasts a capacity of 192 MWp. It is also the first floating solar plant in Indonesia. This project is also part of the country’s efforts to ramp up its renewable energy share.
During the same period, Chandra Asri Group secured an investment worth $194 million from Electric Generating Public Company Limited or EGCO Group, an independent energy producer in Thailand. After completing the transaction process, EGCO will own a 30 percent stake in CDI which is dedicated to infrastructure solutions.
Chandra Asri Group will continue to maintain a majority stake of 70 percent in CDI. The net proceeds will be used for the development of Chandra Asri Group and EGCO’s infrastructure businesses, which include energy, water, and port facilities. Chandra Asri Group chose to work with EGCO after undergoing a comprehensive strategic investor selection process.
This collaboration marks an important milestone for both companies, combining Chandra Asri Group’s expertise in the chemical and infrastructure sectors with EGCO’s expertise in power and energy solutions.
"We are very pleased to make EGCO as our new growth partner to create synergies that will not only improve operational efficiency but also contribute to a more sustainable future," Erwin Ciputra said.
Chandra Asri Group in 2024
The company started 2024 by officially changing its name to PT Chandra Asri Pacific Tbk.
According to the company’s human resources and corporate affairs director Suryandi, this name change emphasizes all business steps taken to provide a significant positive impact for stakeholders.
"This new name also supports the company's vision to become a leading chemical solutions and infrastructure company in Indonesia," said Suryandi.
In May 2024, Chandra Asri Group signed a sale and purchase agreement with Shell Singapore Pte Ltd (SSPL) to acquire its entire ownership in Shell Energy and Chemicals Park Singapore (SECP).
After going through a competitive auction process, CAPGC Pte. Ltd. (CAPGC), a joint venture company majority owned and operated by Chandra Asri Group and minority owned by Glencore through their respective subsidiaries, agreed to acquire SECP which consists of a crude oil refinery with a processing capacity of 237,000 barrels per day, a 1.1 million metric tons per year ethylene cracker in Pulau Bukom and downstream chemical assets in Pulau Jurong.
"This acquisition is a success of our programmed M&A strategy to become a leading chemical and infrastructure player in the region and will further strengthen our business resilience," Erwin said.
The transaction is still subject to regulatory approval and is expected to close by the end of 2024.
In the same month, TPIA shares entered the Morgan Stanley Capital International (MSCI) Global Standard Index for Emerging Markets, based on a quarterly publication published in London. The inclusion of TPIA shares will be implemented at the close of the market on May 31, 2024.
MSCI recognized Chandra Asri Group's impressive market capitalization and free float-adjusted market capitalization, which met the index threshold. This inclusion confirms Chandra Asri Group's position as a major player in the global chemical and infrastructure industry.
In June 2024, the company strengthened its petrochemical business by operating the Bag Film Roll (BFR) Factory which produces heavy duty Sacks. The BFR factory uses the company's polyethylene products, namely metallocene and HDPE which are commonly used as raw materials for plastic bags. BFR production is planned to utilize 30 percent recycled material which utilizes used consumer sacks or post-consumer recycling (PCR).
The BFR plant is expected to increase the effectiveness of the company's internal supply chain and serve customer needs better. In the past year, the BFR Plant has produced packaging for Chandra Asri Group's resin products, namely Asrene® and Trilene®. BFR products are suitable for packaging polymer products in the form of plastic pellets, and are safe for use in food products.
In July 2024, Chandra Asri Group completed the spin-off process to operate an integrated solution in the form of seaport services (loading and unloading services and mooring services) and liquid bulk storage (tank rental) for various industries in Cilegon and its surroundings through its subsidiary, PT Chandra Pelabuhan Nusantara (CPN).
CPN is currently in the process of submitting a concession application to serve external customers and is expected to be completed in 2025.
CPN operates three strategic docks in the Sunda Strait with a total capacity of 96,000 DWT for various products and tank facilities of 518,000 cubic meters for naphtha, ethylene, propylene, pyrolysis gasoline (PyGas) and others. CPN is expected to optimize the operational efficiency of various industries and provide added value to stakeholders.
Chandra Asri Group has been aggressively expanding to various business sectors since late 2022.
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