INVESTMENT IN CHINA AS AN INTEGRAL PART OF · PDF fileDeveloped and co-licensed by CEPSA/UOP ... Investment in China as an integral part of ... Investment in China as an integral part

INVESTMENT IN CHINA AS AN INTEGRAL PART OF CEPSA’S GROWTH STRATEGY

November 2015

© CEPSA | Investment in China as an integral part of CEPSA’s Growth Strategy| November 2015 1

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Since August 2011, CEPSA’s sole shareholder is International PetroleumInvestment Company (IPIC)

For CEPSA, integration in IPIC represents a great opportunity for growthand international expansion and a major business challenge.

Who is CEPSA

IPIC – OUR SHAREHOLDER

© CEPSA | Investment in China as an integral part of CEPSA’s Growth Strategy| November 2015

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• Spain's fourth biggest industrial group in terms of turnover.

• A team of over 10,800 professionals

• Spread over six areas of activity

Who is CEPSA

THE COMPANY


We are a global energy company with more than

85 years of history, operating at every stage ofthe oil value chain

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• Surfactants (n-Par/LAB/LABSA/Alcohol Derivatives)

• Cumene / Phenol / Acetone• Solvents

2014 KEY FIGURES

Workforce: 1,108

Turnover: 3 billion EUR

3 BUSINESS LINES

CEPSA Química AT A GLANCE

CEPSA Química Today


LAB plantBécancour, QuebecCanada

120,000 t/yr. LAB

LAB plantPuente Mayorga

220,000 t/yr. LAB80,000 t/yr. LABSA

400,000 t/yr. Paraffins

Phenol PlantPalos de la Frontera

800,000 t/yr. Cumene600,000 t/yr. Phenol370,000 t/yr. Acetone24,000 t/yr. AMS

Phenol PlantShanghai (China)

360,000 t/yr. Cumene250,000 t/yr. Phenol

150,000 t/yr. Acetone

LAB plantSalvador de BahíaBrazil

220,000 t/yr. LAB120,000 t/yr. LABSA

Sinarmas CEPSA Pte LtdSingapore

Fatty Alcohols (under construction)

GLOBAL FOOTPRINT



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CEPSA QUIMICA’S INTERNATIONALISATION



1980

Initial petrochemical activities in CEPSA Refineries

1967

1960

1970

1980Incorporation of CEPSA UK and CEPSA Italia

Start-up of Puente Mayorga Plant (JV Conoco) – LAB Production

1970

Start-up of Guadarranque Plant (JV Amoco) – PTA/PIA Production

1976

1990

Acquisition of 100% Guadarranque Plant –PTA/PIA Production

1987

Acquisition of 100% Puente Mayorga Plant –LAB Production

1984

1994Acquisition of Palos Plant – Cumene/Phenol Production

1994Construction of Becancour Plant (51% CQ) – LAB Production

2000

1999

Acquisition of 72% of DETEN, Brazil – LAB Production

2001

Construction of Montreal Plant (51% CQ)– PTA Production

2015

Acquisition of 100% Becancour Plant –LAB Production

2015Divestment of PTA/PIA/PET Plants

2015

Shanghai chemical plant start-up

2010

Merger of Petrochemicalactivities

2008

2014Constitution of Sinarmas CEPSA for bio alcohol plant

STRATEGIC VISION


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Chemicals strategic visionTo become a market leader (size and geography) in the business segments it operates, maximizing integration along the value chain and being at the technological forefront.


LAB 40%#1 producer worldwide

Integration 75%Paraffins >75%Benzene 40%

Phenol 40%#2 producer worldwide

Integration 50%Propylene 40%Benzene >50%

Solvents 20%#1 Supplier Iberia, Italy & UK

Integration 100%

KEYS FOR SUCCESS

CEPSA Quimica Strategy

• Integration with Refining Activities • Internationalization

Phenol & Acetone World producer

# 1# 2

Cumene World producer

# 1 LAB World producer

• Focus on markets and products wherewe have a relevant position

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Kerosene

Hydrogen

Fuel Gas

Propylene

Benzene

Fuel Oil

Sulphur

Steam

Steam

Propane

Naphtha

Jet Fuel

Aromatics

Byproducts

REFINERIES

PETROCHEMICALS

• Partnership with clients

• Innovation and Technology


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INNOVATION AND TECHNOLOGY

For Cepsa, research is a tool for value creation, competitiveness and

sustainable growth, which contributes to improving the quality of its products and the technological

capabilities of the Company

CEPSA Química Strategy

Fixed Bed Alkylation. DETAL®

• DETAL® technology launched in 1995. First unit started up inCEPSA Quimica Canada. Developed and co-licensed by CEPSA/UOP

• Since 2004 all new LAB units have used DETAL® technology. NewDETAL® launched in 2010

Partnership

Solid-bedalkylation

n-olefins

BenzeneLAB

87% of new LAB

capacity installed since

1995 uses CEPSA’s

technology.

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Phenol Business Line

PHENOL VALUE CHAIN


Cepsa Química

Cepsa

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Phenol Business Line

PHENOL & ACETONE END USES


MOBILE PHONES, COMPUTERS LAPTOPS AND LED LIGHTS

LIGHT AND RESISTANT PLASTICS AND RUBBER

COMPOSITE MATERIALS, SCRATCH RESISTANT AND EASY-TO CLEAN FURNITURE AND MOULDING RESINS

ACETYLSALICYLIC ACID AND COMPLEX VITAMINS

UNIVERSAL SOLVENT. ACRYLIC POLYMERS FOR PAINTS AND COATINGS

WHY CHINA?

And…250 million Chinese people will

become middle class in the next 10 years

2014 Figures

World No. 1 car sales

CEPSA Chemical Shanghai

GDP growth 7.5%

World No. 1 mobile phone sales

The World largest economy (*)

(*) By GDP (PPP) (**) List of references: Images courtesy of CoolDesign, Stuart Miles and Feelart at FreeDigitalPhotos.net

1.36 Billion people

12© CEPSA | Investment in China as an integral part of CEPSA’s Growth Strategy| November 2015

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6,4 5,5

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2,5

• Drive for self-sufficiency

Chinese market: With the biggest phenol demand growth rate worldwide, over 3 times higher than the rest of the world

Phenol Derivatives growth (2015-2020)

13% BPA

8% Alkylphenol

4% Phenolic Resins

BPA new plants

Chang Chun

Jiangsu Ruisheng

Shandong Lihuayi

Sinopec Sabic

Sinopec Mitsui

Nan Ya Plastic

Shiyou Chemical

Chinese Phenol Trade Chinese Acetone Trade


WHY CHINA?

• Growth in downstream industry


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WHY SHANGHAI?

CQ

LUCITE COVESTRO

EVONIK

LUCITE: 70,000 MT of Acetone consumption

COVESTRO: 200,000 MT Phenol demand

EVONIK: 50,000 MT of Acetone consumption

CHINA: Around 25% of Chinese Demand

Around 65% of Chinese Demand

SHANGHAI CHEMICAL INDUSTRIAL PARK (SCIP)


Around 20% of Global Demand


Largest

Phenol/Acetone hub in the world !!

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THE PROJECT



PETROCHEMICAL PLANTProduction Capacity:

• 360,000 t/yr. of Cumene • 250,000 t/yr. of Phenol• 150,000 t/yr. of Acetone

First CEPSA Petrochemical Plant in Asia

+75% 25%


State Administration of Work Safety

(国家安全生产监督管理总局)

Ministry of Environmental

Protection(环境保护部)

Ministry of Public Security

(公安部)

State Administration for Industry and

Commerce(国家工商行政管理总

局)

Ministry of Railways(铁道部)

Ministry of Transport(交通部)

Inspection and Quarantine

Bureau(检验检疫局)

Customs(中国海关)

Maritime Safety

Administration(海事部)

General Administration of

Quality(国家质量监督检验检疫总局)

LESSONS LEARNED – BUSINESS CULTURE


• You should work with experienced locally based advisors to leveragetheir experience and assist with negotiations.

• Most Procedure and support can be imported but much work is requiredfor adaptation and training.

• Understand the nature of the bureaucracy and approvals required.Developing/maintaining good relationship with authorities.

• Be aware that negotiations can be long and drawn-out, especially whendealing with key deal terms and pricing. You need to be flexible, patientand persistent.


LESSONS LEARNED – HUMAN RESOURCES AS A KEY FACTOR


Early hiring of a local HR Mgr is mandatory.

Selection and starting date of First Line Management is

critical / Don’t change horses in the middle of the race.

Mid-level managers are young compared with Western

standards while turnover is high.

The talent market is very competitive.

Chinese workers value career advancement

opportunities. Make sure there´s a clear path for career

development and advancement.

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2015

Capacity Demand

Bubble size represents MMT

Americas (67%)

EMEA (79%) Asia (76%)

3.0 2.3

3.3 2.7 5.8 4.5

CURRENTLY OVERCAPACITYMARKET BALANCED IN 2017

THE MARKET CHALLENGE - PHENOL SUPPLY DEMAND



New Plants in China 2015 (kMT)

SLOWDOWN IN CHINA



A hard landing already occurred in 1H15:

Electricity production (0.4% increase YTY in

2Q15).

Housing stars dropped by 16% and land

sales by 30% in 1H.

Tax revenue slowed to 5.5% in 2Q (TR rises

twice as fast as GDP)

A New stimulus is in place:

Boosting local Government financing.

Housing Recovery to support growth

already happening.

Think long term

谢谢Thank you


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INVESTMENT IN CHINA AS AN INTEGRAL PART OF · PDF fileDeveloped and co-licensed by CEPSA/UOP ... Investment in China as an integral part of ... Investment in China as an integral part