Thailand's largest industrial conglomerate, Siam Cement (SCC) had entered into a US$225 million joint venture in Iran to produce 300,000 tpa high density polyethylene (HDPE), expected to start commercial operations by H1-2008. Siam Cement holds a 38% stake in the venture, with National Petrochemical Co of Iran holding 40%. Other shareholders include Itochu Corporation of Japan (12%) and Thailand's PTT Chemical Plc (10%).
However, this petrochemical project in Iran has come under pressure as USA urge operations to halt because of the current conflict over Teheran's nuclear program. A source involved in the project said the nuclear dispute between Iran and the US was unlikely to affect the project in the long run because late last year it had been granted a political risk guarantee by the Multilateral Investment Guarantee Agency (MIGA), a unit of World Bank. MIGA issued $122 million in guarantee cover for the joint-venture petrochemical project, its first arrangement of this kind ever for a project in Iran. The guarantee covers investments by Cementhai Chemicals Co, a subsidiary of Siam Cement, PTT Chemical and Itochu Corporation, totalling US$27.1 million, US$7.1 million and US$8.6 million, respectively. The coverage is for 15 years against the risk of breach of contract for both equity and shareholder loan investments. MIGA is also covering Cementhai Chemicals and PTT Chemical against the risk of war and civil disturbance.
As for SCC, the Iranian project is a relatively small investment compared to SCC's total investment portfolio. Also, since the project is in its early stages, it would not bear a significant burden if scrapped. The project is not a strategic investment for the company since it did not link with or support SCC's projects in other countries.
15-Jun-06 
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