Dow Chemical Co. (DOW) has signed a long-term ethylene off-take
agreement with a new Japanese joint venture that will allow the
chemical producer to enhance its Performance Plastics
franchise.
The joint venture is being formed between Japanese companies
Idemitsu Kosan Co. (5019.TO) and Mitsui & Co. (MITSY, 8031.TO)
to construct and operate a Linear Alpha Olefins unit on the U.S.
Gulf Coast.
Dow--the world's second-largest chemical producer by revenue--is
a large consumer of Linear Alpha Olefins and utilizes them within
its Performance Plastics franchise for the production of
high-performance materials. The company said it expects the
agreement with the joint venture will enable a long-term supply and
purchase relationship for Linear Alpha Olefins, which will enhance
its Performance Plastics franchise.
"Today's announcement further illustrates Dow's commitment to
invest in high-return projects that deliver advantaged feedstocks
for our differentiated, downstream derivatives, while
simultaneously building strategic partnerships that drive economies
of scale and improved capital efficiency," Dow Chief Executive
Andrew N. Liveris said. "Taken on the whole, positive disruptive
trends in U.S. shale gas have led us to make different decisions
about where and how we invest for global growth."
Dow billed the agreement as marking the next milestone in its
strategy to integrate cost-advantaged feedstocks to support the
profitable growth of its Performance Plastics franchise. It said
the joint venture will utilize an integrated supply of ethylene
from Dow's production grid on the U.S. Gulf Coast to produce Linear
Alpha Olefins used as comonomers throughout Dow's Performance
Plastics franchise, and will contribute "significant capital" for
these rights.
Financial terms of the agreement weren't however disclosed.
The company noted that location options for the Linear Alpha
Olefins unit are currently being explored. Construction and
start-up of the new unit is targeted for 2016.
Dow's latest announcement comes after its said last week that it
is accelerating its divestiture of noncore businesses and is
targeting nearly $1.5 billion of proceeds over the next 18
months.
The chemical producer had already unveiled plans to shut 20
facilities and eliminate 2,400 jobs in Europe, the U.S. and Japan.
It also is trimming capital expenditure as part of efforts to boost
cost savings to $2.5 billion from a target that had already been
doubled to $1.5 billion over the past year.
Dow's shares closed Friday at $33.81 and were inactive
premarket. The stock has risen 4.6% so far this year.
Write to Saabira Chaudhuri at saabira.chaudhuri@dowjones.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires