Sat, Dec 08, 2012 - Page 1 News List

Formosa wins appeal for cracker expansion

GET MOVING:Formosa Petrochemical says it has to talk to its US partner, Kraton, about a new timetable for the project, which was supposed to be completed next year

By Camaron Kao and Helen Ku  /  Staff reporters

Formosa Petrochemical Corp (台塑石化) yesterday said it planned to start an expansion project of its naphtha cracker in Yunlin County’s Mailiao Township (麥寮) after the firm won an administrative appeal against the Environmental Protection Administration (EPA).

The Executive Yuan on Thursday overruled the strict environmental conditions the EPA had set on the project, a joint venture with the US-based Kraton Performance Polymers to produce hydrogenated styrenic block copolymer (HSBC), a high value-added rubber product.

“Once we receive the official document on the ruling, we will contact Kraton to continue the project in Yunlin,” Formosa Petrochemical chairman Chen Bao-lang (陳寶郎) said by telephone.

Chen did not elaborate on when the company would begin the project, saying the company needed to discuss the timetable and other details with Kraton.

The project won the Fair Trade Commission’s approval in October last year and was expected to cost more than US$200 million.

Chen said Formosa Petrochemical and Kraton would share the cost equally, with each holding 50 percent in the venture, which was previously set to become operational by the second half of next year.

However, the EPA’s Environmental Impact Assessment Committee made a policy change earlier this year, stipulating that volatile organic compound (VOC) emissions generated from flares, water cooling tanks, and while painting, cleaning and performing annual maintenance on water storage tanks, should also be viewed as sources of pollutants and thus subject to the regulatory VOC limit.

The committee rejected both of Formosa Petrochemical’s appeals in August and September. The company then lodged an administrative appeal with the Cabinet.

The Cabinet overruled the EPA’s decision that total VOC emissions should include not only VOCs produced in the production process, but also those produced from the five other sources.

The Ministry of Economic Affairs yesterday welcomed the news, while the Industrial Development Bureau (IDB) said the EPA’s request was “unreasonable and unnecessary.”

“We think the dismissal is helpful for Formosa Plastics Group (台塑集團) to transform its business and is in line with our expectation and policy of helping Taiwan’s traditional industries transform and upgrade their business,” IDB Deputy Director-General Lien Ching-chang (連錦漳) said by telephone.

Lien said the EPA’s additional VOC requirement would pose barriers for the group and other petrochemical firms in transforming their businesses.

Chen said the plant, when completed, is expected to generate NT$4.5 billion (US$136.36 million) in revenue a year and the HSBC the plant produces will serve as raw materials for downstream companies, creating NT$15 billion revenue a year for the industry.

However, Fubon Securities Investment Services Co (富邦投顧) analyst Kerry Wu (吳致勤) expressed reservations about the project’s near-term contribution to the company.

“We are neutral on this news, as the related earnings contributions will only be realized in two years,” Wu said in a note yesterday, while maintaining the firm’s “reduce” recommendation on Formosa Petrochemical’s shares, which fell 0.35 percent to NT$85.70 yesterday.

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