Shanghai Huayi Group: Describes Restructuring Scheme     

Shanghai Huayi (Group) Company (Shanghai Huayi Group), the state-owned capitalization enterprise that is affiliated with the State-owned Assets Supervision and Administration Commission of the Shanghai municipal government (SHSASAC), possesses three listed companies including Shanghai Chlor-Alkali Chemical Co., Ltd. (SH: 600618), Double Coin Holdings Ltd. (SH: 600623), Shanghai 3F New Materials Co., Ltd. (3F New Materials, SH: 600636) and also holds more than 20 sub-companies. Its portfolio includes nearly ten thousand products belonging to several sectors, including foundation industrial chemicals, rubber products, chemical agents, biological chemicals and chemical equipment. At present, Shanghai Huayi Group operates 900 000 t/a of acetic acid, 800 000 t/a of methanol, 6 million pieces/a of tires, 1.4 million t/a of coke, 1 billion m3/a of coal gas and 110 000 t/a acrylic acid/acrylates. Total assets were RMB 39.27 billion as of the end of 2007.
   In order to accelerate development, Shanghai Huayi Group announced a restructuring scheme recently.
   On October 15th, 2008 Jin Mingda, chairman of Shanghai Huayi Group, announced a four step reform for Shanghai Huayi Group at a contract signing press conference of Dow Chemical and Shanghai Tianyuan Huasheng Chemical Co., Ltd. (Tianyuan Huasheng Chemical). Shanghai Huayi Group will push its core businesses to list in stock markets; will encourage sub-companies to find partners in the region outside of Shanghai that can guarantee resources, energy, market and effectiveness to cooperate or create joint ventures; will expect other companies to purchase or annex some of its own small sub-companies or build joint ventures with them; and will seek positive cooperation at higher levels with central government-owned firms, multinationals and strong investment companies.

Accelerating the listing of core businesses on stock markets   

To drive the enterprises with prominent principal work to be greater and stronger, to compel resources to be centralized to the principal work in the superior enterprises, to advance the whole enterprise and core business property coming into the stock market - these priorities were announced by SHSASAC to its own enterprises. Shanghai Huayi Group tries hard to conform to those requirements.
   To avoid redundant development and optimize business distribution, on September 29th, 2007, SHSASAC regulated the principal business scopes for all 11 groups it manages. Each core business of Shanghai Huayi Group is required to focus its core business in manufacturing coal-based co-production products and clean energy products, manufacturing high molecular polymers, plastic products and tires, manufacturing fine and specialty chemicals. Shanghai Huayi Group is also allowed to develop emerging businesses - chemical logistics and chemical engineering services, and the manufacture of biological drugs and biochemicals.
   To pour the assets of Shanghai Coking & Chemical into 3F New Materials was one of the actions to speed up the listing of its core business for Shanghai Huayi Group. On July 2nd, 2008 3F New Materials announced its assets-reorganization scheme to purchase 100% equity in Shanghai Coking & Chemical from Shanghai Huayi Group, China CINDA Asset Management Corporation and China Huarong Asset Management Corporation. (CCR2008 No.21)
    3F New Materials is one of the big enterprises in the organic fluorine chemical industry with a complete fluorine chemical industry chain. As of June 30th, Shanghai Huayi Group became the largest stockholder of 3F New Materials by holding 99 523 600 shares of stock, accounting for 31.53% of the total.  
   The main products of Shanghai Coking & Chemical are methanol, coke, phthalic anhydride, carbon monoxide, acetic anhydride, industrial gasses and so on. It has an annual capacity of around 350 000 tons of methanol and will build another methanol production facility with an annual capacity of 450 000 tons soon. The total assets of Shanghai Coking & Chemical were audited to RMB7.51 billion, on sale was RMB 5.71 billion in 2007, and the net income was RMB230 million.
    Once Shanghai Coking & Chemical merges into 3F New Materials, Shanghai Huayi Group will hold 58% equity in 3F New Materials, and 3F New Materials will expand its current core business - fluorine chemicals from coal chemicals. Jin Mingda disclosed that the merger scheme has already been approved by SHSASAC, and now is subject to the approval of the China Securities Regulatory Commission. Once approved, 3F New Materials will become the listed platform for the coal-based co-production business of Shanghai Huayi Group. "This merger is expected to be completed before the end of 2008," commented Jin Mingda, "Following that, other sub-companies including Wujing Chemical Industry Company will be merged into 3F New Materials."
   The 400 thousand t/a PVC project that Shanghai Huayi Group constructed together with China Shenhua Group and Inner Mongolia Yili Chemical Industry Co., Ltd. came on stream in October 2007. Double Coin Holdings Ltd., a sub-company of Shanghai Huayi Group, started construction on a 2.5 million pieces/year unit for all-steel radial ply truck tires in Chongqing municipality in 2007. Shanghai Huayi Group will soon inaugurate construction on the first phase of its Anhui Chemical Industry Park in Chaohu, Anhui province, with an investment of RMB4.4 billion.

Spread business to a nationwide basis in the Yangtze River Delta   

Shanghai Huayi Group mainly has four production bases: in Shanghai Chemical Industry Park in the south of Shanghai, in Wujing Clean Energy and Advanced Material Base in the middle of Shanghai, in Wusong Fine Chemical Industry Base and in Shanghai Minhang Tire Manufacture Base in the north of Shanghai.
   Shanghai Huayi Group announced its industry base scheme in March 2008: Shanghai Wujing Chemical Industry Base will focus on clean energy, advanced materials research and cyclic economy demonstration, and the demonstration of renovating old industrial base. Shanghai Chemical Industry Park will focus on the production of advanced materials in the fine chemical industry, using petrochemicals as raw materials. The Wusong base targets development of a comprehensive production base of fine chemicals and gas supplied to the steel and iron industries. The Minhang base will highlight research and industrialization demonstration of giant tires.
   Shanghai Huayi Group will distribute business nationwide based in the Yangtze River Delta to build a resource-conserving and environmentally friendly "green chemical industry", according to its developmental strategy.
   Shanghai Huayi Group's Anhui Wuwei Base is an example of the layout in the Yangtze River Delta. (CCR2008 No.26) On October 16th, Shanghai Huayi Group started construction on the first project of coal-based co-production in the Wuwei base. This base will use coal as raw material, and take high added value fine chemicals, petroleum alternatives, strategic energies as key development areas. The project, with a total investment of RMB35 billion, is scheduled to be constructed in two phases. In the first phase, Shanghai Huayi Group will construct facilities mainly using coal as raw material to produce 600 000 tons of methanol and 500 000 tons of ethyl acetate per year. It is scheduled for startup at the end of 2010. Other projects including 1.8 million t/a methanol, 500 000 t/a olefins and 600 000 t/a monoethylene glycol will be built during 2011-2015.

Seeking cooperation with multinationals