Brazilian petrochemical company Braskem (NYSE: BAK) plans to ramp up its investments in Mexico as a result of the country's ongoing reforms of its energy sector.
Roberto Bischoff, head of Braskem's Latin America unit, said the company's US$3.5bn Ethylene XXI joint venture in Mexico marks only the beginning of Braskem's investment strategy in Mexico.
In an interview with El Financiero, Bischoff said that as a result of Mexico's energy reforms, Braskem could increase its investments by 30%. It was not clear if he was referring to annual investments.
"The energy reform that has been proposed opens investment opportunities in the petrochemical industry by increasing the availability of raw materials," he said. "We see an opportunity to increase our investments."
Bischoff said that Braskem will construct a 150MW power plant to supply Ethylene XXI, an investment of US$150mn. The company may also install a second plant of the same size.
"With the energy reforms we have plans to increase this infrastructure, which will also enable us to sell electricity to third parties," he said.
The largest shareholder in Braskem is Brazilian construction firm Odebrecht. Earlier this month, company president Marcelo Odebrecht met with Mexican President Enrique Peña Nieto and said the company plans to invest US$8.1bn in Mexico over the next five years, including in the petrochemical sector.
Ethylene XXI, which is located in the Coatzacoalcos region of Veracruz state, will have annual production capacity of 1.05Mt polyethylene (PE) and an equal volume of ethylene feedstock, with two high-density polyethylene (HDPE) lines and one conventional low-density (LDPE) line. Production from the site will help reduce Mexico's trade deficit in PE and will also be exported.
In September, Braskem said Ethylene XXI was 45% complete. The site is due to start production around June 2015 and already has a portfolio of around 100 clients.
Braskem has a 70% stake in Ethylene XXI, with Mexican industrial conglomerate Idesa owning the remaining 30%.
Production at Ethylene XXI will be based on ethane produced by Mexico's national oil company Pemex from natural gas. Braskem's investment in the complex forms part of its effort to diversify its production base away from the higher cost naphtha feedstock it uses in its Brazilian plants.
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