1.0 INTRODUCTION

Pursuant to Chapter 10 Paragraph 10.08 of the Main Market Listing Requirements (“MMLR”) of Bursa Malaysia Securities Berhad (“Bursa Securities”), PETRONAS Chemicals Group Berhad (“PCG” or “the Company”) wishes to announce that the Company has entered into a pro-rata Transaction Agreement Guarantee (“TAG”) with Pengerang Refining Company Sdn. Bhd. (“PRC”) to provide guarantee to LG PETRONAS Chemicals Malaysia Sdn. Bhd (“LGPC”)’s payment and performance obligations under the Butadiene Supply and Purchase Agreement (“BSPA”) in favour of PRC with a maximum exposure of up to 49% which is in proportion to PCG’s equity shareholding in LGPC.

2.0 INFORMATION OF THE COMPANIES

2.1 Information on PCG

PCG is the leading integrated chemicals producer in Malaysia and one of the largest in Southeast Asia. PCG operates several world-class production sites in Malaysia, Asia-Pacific, Europe and North America. With a total combined production capacity of 15.4 million metric tonnes per annum (mtpa), it is involved primarily in manufacturing, marketing and selling a diversified range of chemical products, including olefins, polymers, fertilisers, methanol, other basic chemicals, derivative products and specialty chemicals.

2.2 Information on LG Chem, Ltd. (“LG Chem”)

LG Chem is a leading Korean chemical company which manufactures newly developed, innovative materials and solutions and is pursuing business expansion and new opportunities in information technology & electronic materials and energy solution.

2.3 Information on PRC

PRC, a private limited company incorporated on 16 August 2013, is a joint-venture company between Petroliam Nasional Berhad (PETRONAS) and Aramco Overseas Company B.V. The principal activities of PRC are to develop, construct, commission and operate the refinery and steam cracker forming part of the refinery and petrochemical integrated development located at Pengerang Integrated Complex (“PIC”).

2.4 Information on LGPC

LGPC is a joint-venture company formed between PCG and LG Chem at equity shareholding of 49% and 51% respectively for the development of a Nitrile Butadiene Latex (“NBL”) manufacturing plant at PIC in Johor. The primary objective of the plant is to cater to the expanding demand in the nitrile glove market.

3.0 TRANSACTION

PCG has entered into a TAG on 15 July 2024 where the TAG is a key requirement for the execution of BSPA between LGPC and PRC where both shareholders of LGPC are obligated to provide a TAG with respect to LGPC’s payment and performance obligations under the BSPA, in proportion to their equity shareholding in LGPC.

The TAG is a related party transaction, as it involves the interest of PETRONAS through PRC and falls within the ambit of Chapter 10 Paragraph 10.08 of the MMLR of Bursa Securities.   

4.0 RATIONALE AND BENEFIT OF TAG

Shareholders’ guarantee will allow continuity of LGPC business in the event LGPC is unable to perform its obligations under the BSPA. The guarantee by both shareholders will insulate LGPC from consequences of defaulting.

5.0 RISKS FACTORS 

The identified key risks are non-payment by LGPC and failure to offtake by LGPC for a continuous and prolonged period which have been classified as low risk. The mitigations involve LG Chem and PCG ensuring that any default is addressed before the guarantee is activated.

6.0 EFFECTS OF THE TRANSACTION

The Transaction will not have any material financial impact for PCG and/or its subsidiaries (“Group”) in the financial year ending 31 December 2024 nor will it have any effect on the share capital and substantial shareholders’ shareholdings of the Company. The Transaction is also not expected to have a material effect on the net assets per share, earnings per share and gearing of the Group for the financial year ending 31 December 2024.

7.0 INTEREST OF DIRECTORS, MAJOR SHAREHOLDERS AND PERSONS CONNECTED

None of the directors and/or major shareholders of PCG or persons connected to them have any interest, direct or indirect, in the Transaction save for the following:

8.0 AUDIT COMMITTEE’S STATEMENT

The Board Audit Committee, having considered all the relevant factors in respect of the Transaction, is of the view that the Transaction is in the best interest for PCG as the Transaction is entered under fair, reasonable and on normal commercial terms which are not detrimental to the interest of the minority shareholders of Company.

9.0 DIRECTORS’ STATEMENT

The Board (save for the Interested Directors) having considered all the relevant factors in respect of the Transaction, are of the view that the Transaction is in the best interest for PCG, fair, reasonable and on normal commercial terms and not detrimental to the interest of the minority shareholders of the Company.

10.0 APPROVAL REQUIREMENTS

The highest percentage ratio applicable to the TAG is 1.13% pursuant to Paragraph 10.02(g) of the MMLR of Bursa Securities, based the latest audited consolidated financial statements of PCG for the financial year ended 31 December 2023. As such, the Transaction does not require the approval of PCG’s shareholders.

11.0 DOCUMENTS FOR INSPECTION

The TAG is available for inspection during normal business hours at the registered office of PCG at Tower 1, PETRONAS Twin Towers, Kuala Lumpur City Centre, 50088 Kuala Lumpur, Malaysia, from Mondays to Fridays (except public holidays) for a period of three (3) months from the date of this announcement.

This announcement is dated 15 July 2024.