KUALA LUMPUR: Lotte Chemical Titan Holding Bhd has obtained shareholders' approval to award a US$1.65 billion (RM6.8 billion) engineering, procurement and construction (EPC) contract in Indonesia to a Korean company.

The petrochemical company said the EPC works for the downstream plants and complex facilities of the Lotte Chemical Indonesia New Ethylene (LINE) project was awarded to Lotte Engineering & Construction Co Ltd (LEC).

Lotte said it had sought minority shareholders' approval for the proposed award through the voting carried out during its extraordinary general meeting today.

President and chief executive officer Park Hyun Chul said the project would funded via a 60:40 debt-equity structure arrangement with the company using its internal funds for the equity financing on the 51 per cent stake in the joint-venture (JV) company.

"Our current strong net cash position in excess of RM5 billion as at September 30, 2021, would be sufficient to provide for the equity funding for our portion, amounting to about US$806 million (RM3.3 billion)," he said in a statement today.

Park said Lotte would not need to raise any form of additional equity funding from its shareholders.

"The debt portion for the development cost would be in the form of project financing, which is expected to be self-sustainable by the LINE project post-completion."

With the project financing, he said the company would subsequently have an estimated gearing ratio of 0.84 times, from the current net cash position.

"The project will provide incremental value creation for our shareholders as they could benefit from the enlarged production capacity base of our company," he said.

The company had announced earlier that it was commencing construction of the large-scale LINE expansion project in Merak, Banten province in Indonesia.

The LINE project, which is a JV with its parent Lotte Chemical Corp, will serve as the key expansion drive for the company to solidify its position as a top-tier petrochemical company in Southeast Asia.

The LINE project, with investment value of US$3.95 billion (RM17 billion), is expected to commence construction next year and slated for completion by 2025.

The project comprises an integrated petrochemical facility with various downstream petrochemical plants.

It entails the development of a cracker plant, which will use naphtha and liquefied petroleum gas as its feedstock to produce 1,000 kilometric tonnes per annum (KTA) of ethylene and 520 KTA of propylene, as well as other downstream and derivatives plants.

Located right next to its current facilities, the new complex will provide key integration benefits to the three existing standalone polyethylene plants that the company operates in its Indonesian site.

The LINE project would also provide a significant boost to the company's production capacity from the current 3,568 KTA to 5,878 KTA, which represents an increase of 65 per cent for the its total production capacity.

At the onset of the Covid-19 pandemic in 2020, Lotte said it had undertaken a strategic review to determine an appropriate timing for the commencement of construction of the Indonesia LINE project.