[Photo by Lotte Chemical Corp.]

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Lotte Chemical Corp. is adding a chemical compound plant in its petrochemical complex in Yeosu, South Jeolla Province, by the end of the year in a joint venture with GS Energy Corp. at a cost of 800 billion won ($678.7 million).

The two Korean companies signed a deal Monday to create a joint venture, tentatively named Lotte-GS Energy Company, which would specialize in producing chemical compounds like bisphenol A (BPA) and C4 fraction.

Lotte Chemical would hold a 51 percent interest in the new entity, with GS Energy to own the rest. The two firms plan to jointly invest 800 billion through 2023 to build a plant capable of producing 200,000 tons of BPA and 210,000 tons of C4 fraction products a year.

They expect the joint venture to generate 100 billion won in annual operating profit and 1 trillion won in sales, as well as create 7,700 new jobs.

BPA is used in making polycarbonate plastics whose applications range from electronic devices, medical equipment to auto headlamp cases. C4 fraction is a hydrocarbon compound used to produce butadiene, a material for making synthetic rubber, and tert-butyl alcohol, which goes into engineered marble.

The two companies expect the joint venture to help sharpen their competitive edge in their respective businesses. Lotte Chemical is seeking to attain BPA supplies from the joint company to make its polycarbonate products more price competitive. It is also reportedly mulling to expand its C4 fraction business. As for GS Energy, its refining unit GS Caltex would provide a steady source of supplies like propylene, benzene and C4 fraction, which are key materials needed for production at the new plant. It is also seeking to use the joint venture to bolster its petrochemical business.

“We will continue rationalizing our portfolio to respond more swiftly to changes in the petrochemical market and boost our competitiveness,” said Lotte Chemical Chief Executive Lim Byung-yun. GS Energy CEO Huh Yong-soo also saw the joint venture as an opportunity to “strengthen its competitive edge in the energy sector and broaden its business portfolio.”

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