Synthesis Energy Systems partners expand gas plant in China; make acetic, propionic acid

Synthesis Energy Systems partners to expand gas plant in China; to make acetic, propionic acid

8:45 AM, 30th June 2015
Synthesis Energy Systems partners to expand gas plant in China; to make acetic, propionic acid

HOUSTON, US: Synthesis Energy Systems Inc (SES) said that it has entered a share purchase and investment agreement with Rui Feng Enterprises Ltd, a British Virgin Islands company and a separate operation & management agreement with Shandong Saikong Automation Equipment Co Ltd, an affiliate of Rui Feng registered in China to achieve SES’ strategic aim of repurposing and expanding its Zao Zhuang New Gas Company joint venture facility in Zao Zhuang City, Shandong province, China. Effective 26 June, the first installment payment of $1.6 million is received by SES, it said.

The partners have agreed to complete expansion within 24 months, SES said.

The partners will pay $10 million cash to SES in four installments over a period of 15 months for 59.81 percent of SES’s shares in Zao Zhuang. Additional debt financing will be raised by the transaction partners and the Zao Zhuang JV for completion of the expansion. SES is not required to invest additional equity for the expanded Zao Zhuang facility and will retain a minimum 24.52 percent ownership in the new enterprise.

A separate agreement is formed between the partners and the Zao Zhuang plant to establish a project team to carry forward the day to day plant operations. Also the partners will finance all operating costs of the Zao Zhuang plant and have preferential profit distribution right for the first 36 months of operations from the expanded facility.

The two existing SES gasification systems will be refurbished and prepared for full capacity operation and the syngas will be used for the production of 100,000 tonne per year of acetic acid, as well as a secondary product of propionic acid (~10,000 tpa).

In addition, Zao Zhuang plant will continue to generate methanol from Xuecheng Energy’s coke oven gas under the terms of the existing Methanol cooperation agreement between Zao Zhuang and Shandong Weijiao Group Xuecheng EnergyCo Ltd.

“The Zao Zhuang plant expansion is expected to allow our two SES gasification systems to operate at 100 percent design capacity which will drive lower unit costs for the new enterprise plus the production of acetic acid and the related products is expected to provide higher profitability through improved operating margins which we believe will produce long-term financial results from the Zao Zhuang joint venture,” said Robert Rigdon, president and CEO, SES.

“Zao Zhuang is a preferable location to place this important acetic acid production facility. We are utilizing an advanced downstream technology that has been commercially proven to generate acetic acid at favourable economics and we will now put all efforts to move quickly toward our goal of a big project success,” said Madame Li Bing, general manager, Rui Feng.

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