(Yicai) May 27 -- Shares in Tongkun Group and Xinfengming Group slumped today after the two Chinese synthetic fiber giants said they are reducing their investment in a proposed petrochemical complex in Indonesia's North Kalimantan province by 32 percent due to changes in the internal and external market environment.

Tongkun’s share price [SHA: 601233] closed down 0.13 percent at CNY15.51 (USD2.14) today after was down 2.4 percent earlier. While Xinfengming’s stock [SHA: 603225] was down 2.9 percent at CNY14.8 after was down as much as 4.0 percent intraday.

The two companies are trimming their investment in the facility in the North Kalimantan Industrial Park to USD5.9 billion from the USD8.6 billion pledged when the plan was first announced almost a year ago, they said in separate statements on May 24. As a result, the factory’s product output and shareholding ratios will be adjusted.

The planned refining capacity will be reduced to 10 million tons a year from 16 million tons, while production of the polyester raw material paraxylene will be trimmed to 2 million tons from 5.2 million tons, they said.

But ethylene output will be hiked to 1.2 million tons a year from 800,000 tons and that of several downstream polyolefin products was also increased.

The decision to reduce the size of the Indonesian petrochemical factory was a prudent response to the many changes in the Chinese and international political and economic environment over the past year, they said. But neither party offered more details.

Jiaxing-based Tongkun’s shareholding will be increased to 80 percent from 45.9 percent, while Tongxiang Zhouquan-headquartered Xinfengming’s stake will be diluted to 15 percent from 44.1 percent. The remaining equity is held by a Shanghai investment company and its shareholding will be reduced to 5 percent from 10 percent.

All the refined oil products will be supplied to the Indonesian market and the paraxylene products will be exported to China as announced last year. The polyolefin products will be sold to members of the Association of Southeast Asian Nations, whereas the previous plan had earmarked some to be exported to China.

The scaled-down factory should achieve net profit of USD520.8 million a year once it is up and running and annual revenue of USD7.4 billion, the report said. The pay back period, including a four-year construction period, is just over 10 years.

Editor: Kim Taylor