The MoU will further support Dialog’s initiatives and contribution towards making a positive impact on the environment as well as supporting the Malaysian government’s initiatives in sustainability as stated in the circular economy road map.g
KUCHING: Dialog Group Bhd’s wholly-owned subsidiary, Dialog Corporate Sdn Bhd, has inked a memorandum of understanding (MoU) with Diyou Fibre (M) Sdn Bhd (DFMSB) to establish a special purpose vehicle (SPV) with a total investment outlay of approximately US$25 million (RM106 million).
In a filing with Bursa Malaysia, the tank terminal operator said the SPV would build, own and operate a food-grade recycled polyethylene terephthalate (recycled PET) pellets production facility and sell food-grade recycled PET to food and beverages customers.
“The venture into the post-consumer plastics recycling industry would be Dialog’s first investment into the downstream petrochemicals business and it would serve to meet the increasing demand for food-grade recycled PET materials resulting from the drive by the international community to support a circular economy,” it said.
Dialog is set to acquire 51 per cent equity interest structure in the SPV while DFMSB to acquire the remaining 49 per cent.
Dialog said the MoU would further support the company initiatives and contribution towards making a positive impact on the environment as well as supporting the Malaysian government’s initiatives in sustainability as stated in the circular economy road map.
It said that the proposed venture would be a continuation of the initiatives by Dialog to achieve business sustainability and fulfil its environmental, social and governance agenda through commercially viable ventures.
Currently, Dialog has invested in a startup company which has developed and continues to develop proprietary technology to capture carbon and utilise the carbon in the production of fuels and chemicals which will result in the reduction of greenhouse gas emissions.
No further details were provided at this juncture such as the capacity of the facility as feasibility studies are still on-going.
Nevertheless, total investment is estimated to be around US$25 million or about RM106 million with Dialog expected to finance this through internally generated funds and borrowings.
The team with Public Investment Bank Bhd (PublicInvest Research) said this was not an issue for Dialog given its cash balance of RM1.7 billion and net gearing of only 0.09 times as of the third quarter of financial year 2021 (3QFY21).
“While this development represents Dialog’s first investment into the downstream petrochemicals business as part of its initiatives to achieve business sustainability and to fulfil its environmental, social and governance (ESG) agenda, we see increasing demand for food grade recycled PET materials resulting from the drive by the international community to support a circular economy,” it explained.
Currently, the global recycled PET market size is expected to reach US$14.4 billion by 2028, growing at a cumulative annual growth rate of 6.7 per cent.
The growing beverage industry in countries such as China, India, Japan, South Korea, Vietnam, and the Philippines is expected to drive the global recycled PET market over the period.
“In addition, rising concerns about the sustainability of natural resources in economies of North America and Europe are expected to have a positive influence on the product demand over the forecast period,” PublicInvest Research added.
“According to European Union targets, plastic bottles in the EU will contain at least 30 per cent recycled content by 2030. Meanwhile in UK, there will be an introduction of plastic packaging tax from April 2022 to manufacturers that do not contain at least 30 per cent recycled plastic.”