Pemex Board Approves Joint Venture With Mexichem Without Changes
Petroleos Mexicanos, the world’s fourth-largest oil producer, approved a petrochemical joint venture yesterday with Mexichem SAB (MEXCHEM*) that had been postponed since the agreement was announced in June 2011.
The board of the state-owned company known as Pemex approved the project without changes, Hector Moreira, a director, said yesterday in a phone interview from Mexico City.
Mexichem will contribute about 60 percent of the $556 million in assets that the new company owns and will invest about $200 million in the project. The Latin American chemical producer has bought more than 15 companies since 2007.
Pemex, based in Mexico City, expects to boost vinyl chloride production, or VCM, to more than 400,000 tons annually, which represents an increase of 105 percent from its 12-month output through November. The deal, which gained antitrust approval 15 months ago, had waited for Pemex board backing amid disagreements with union representatives holding five of the board’s 15 seats.
“The proposal was supported by the union members,” said Moreira, who is one of four independent directors added to Pemex’s board in 2009.
The board also ratified appointments of new executives by Chief Executive Officer Emilio Lozoya, who took over Dec. 1, Pemex said in a e-mailed statement.
Mario Beauregard, former CFO of OHL Mexico SAB and Su Casita SA, will take over as chief financial officer, and Victor Diaz was named as chief administration officer.
Mexichem gained as much as 2.4 percent since Bloomberg News reported Jan. 15 that the venture was scheduled for a vote at yesterday’s meeting. The stock closed at 72.81 pesos in Mexico City yesterday and has gained 75 percent in the past year.
“This is a watershed event for the chemical and petrochemical industries in Mexico,” said Enrique Ortega, Mexichem’s director of strategic planning and investor relations. The model of the state-owned company working with the private sector may spark renewed petrochemical investment and activity, he said yesterday in a telephone interview.
On Sept. 17, then-Pemex CEO, Juan Jose Suarez Coppel said the Mexichem joint venture model will prompt similar projects for the oil producer with private petrochemical companies.
Mexichem is cutting costs after acquiring suppliers or merging them to create lower-cost projects. The company paid about $580 million in May to buy more than 90 percent of Wavin NV in its largest purchase as it expands overseas to diversify revenue sources.
Mexichem, based in Tlalnepantla, Mexico, said Nov. 22 that multiple delays by Pemex prompted the chemical maker to seek expansion outside Mexico for its VCM production.
Mexichem said Aug. 16 that it was in talks with a unit of Occidental Petroleum Corp. (OXY) to build a $1 billion ethylene facility to meet the Mexican chemical maker’s goal of having its own guaranteed supply of polyvinyl chloride.
The chemical producer, controlled by billionaire Antonio del Valle, wants to reduce its dependence on third-party vinyl chloride producers such as Dow Chemical Co. (DOW) VCM is a raw material used to make plastic pipes.
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