Singapore-based Jurong Aromatics Corporation, which operates what is said to be one of the largest petrochemical plants globally on Jurong Island, cannot service its interest payments and is said to be negotiating a debt restructuring with bankers amidst declining oil prices, according to a Bloomberg report.
Citing executives aware of this development, Bloomberg said that operations at the $2.4 billion plant have been stalled since December 2014, due to JAC currently being engaged in negotiations with its lenders, which include BNP Paribas SA and Standard Chartered Plc, as well as suppliers Glencore Plc, BP Plc and SK Energy Co..
Production at the plant began in September 2014 with a target of 1.5 million tonnes of aromatics and 2.5 million tonnes of transportation fuels per annum.
Recent falls in hydrocarbon commodity prices have impacted Singapore’s strategy to leverage upon its position as a production & processing hub for the petrochemical industry in the Asia Pacific, in addition to other efforts aimed at making it an energy hub.
According to Bloomberg, JAC had $1.53 billion in liabilities and $68.7 million of accumulated losses as at the end of 2013, with BP, Glencore, SK Energy having secured claims against the firm. Meanwhile BNP Paribas led a $1.73 billion loan facility in 2011 that remains unpaid.
Apparently, JAC exhausted its working capital financial reserves in December 2014. Due to interest payments being delayed and a grace period ceasing, some lenders have been threatening to tip the company into receivership, while shareholders and suppliers are negotiating for an extension of the grace period until an agreement is reached.
BP, SK Energy and Glencore – which are owed about $500 million – are allegedly seeking to convert the debt into equity, which would dilute current shareholders to the point of the three firms holdings 75 per cent of the firm. Currently, JAC is owned 30 per cent by SK International Investment, 25 per cent by China’s Jiangsu Sanfanxiang Group Co. and 10 per cent by Glencore.
A review of the records maintained by Singapore’s Accounting and Corporate Regulatory Authority (ACRA) indicate that other shareholders include Arovin Ltd, Shefford Investments Holding, UVM Investment, Essar Ltd and EDB Investments, a unit of Singapore’s Economic Development Board (EDB).
Apparently, Arovin and Shefford Investments – representing close to 20 per cent of the company – have resisted that proposal and had sought to reach an agreement with Dutch commodity trader Trafigura Beheer BV, which would pay a fee to use the plant itself.
In a statement to Bloomberg, EDB executive director (energy and chemicals), Damian Chan, said because JAC lacks integration with other plants on Jurong Island, the impact to the rest of the energy and chemicals cluster is expected to be limited.
Chan said, “Nevertheless, in view of the people employed and the assets invested, EDB continues to encourage and be facilitative of discussions among the stakeholders to start up Jurong Aromatics’s operations. Singapore has developed an extensive chemicals portfolio, of which aromatics is one of them. Unfortunately the aromatics market is currently in a down cycle and aromatics producers are finding it more difficult to deliver returns.”