Sinochem Energy goes for IPO to power higher-value businesses

Hong Kong

SINOCHEM Energy, a unit of China's state-owned Sinochem Group, has filed for a Hong Kong initial public offering (IPO) of about US$2 billion, as the group seeks to raise capital amid a shift to higher-value businesses, including petrochemicals production.

Sinochem Energy operates the group's oil and petroleum products trading, refining, storage and logistics, as well as distribution and retail businesses - but not its struggling upstream business that includes overseas oil and gas production.

Reuters reported in April that the group had hired seven banks for the listing of its key oil assets that was expected to raise about US$2 billion. The proposed float comes amid a push by Beijing to inject new life into bloated state-owned enterprises by encouraging private capital investment in such enterprises.

China Tower, the world's largest telecoms tower operator, for example, is raising up to US$8.7 billion in its Hong Kong listing. The state-owned firm has secured US$1.4 billion from 10 cornerstone investors.

Beijing is also looking to create bigger, stronger state firms, and build globally competitive enterprises.

Sinochem Group is set to merge with state-owned ChemChina, which in 2016 agreed to buy Swiss pesticides and seeds group Syngenta for US$43 billion.

The Sinochem-ChemChina deal will create the world's biggest industrial chemicals firm worth around US$120 billion, to be led by Sinochem chairman Frank Ning.

Sinochem Energy's IPO plans have been pushed ahead by Mr Ning, who joined its parent group in early 2016 from food group Cofco, where he was well known for aggressive restructuring and mergers and acquisitions.

Under his leadership, several Sinochem units have been given more leeway in their expansion plans and more support for tapping capital markets for fundraising.

Hit by low oil prices over the last few years, Beijing-based Sinochem Group has aimed to shift from exploration and production to value-added refining and retailing businesses.

Sinochem Energy said in its filing that it plans to expand its key refining asset, the Quanzhou refinery in the southern province of Fujian, to 300,000 barrels per day (bpd), from 240,000 bpd now.

It will also build units at Quanzhou to produce a million tonnes of ethylene and two million tonnes of petrochemical derivatives (both figures for annual output). The company did not give a timeline for the expansions. Sinochem Energy operates one of China's largest commercial oil tank farms, with 32 million barrels of storage capacity, and has some 800 petrol stations under its brand. REUTERS