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September 22, 2017

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Formosa Plastics Group to expand steel investment in Vietnam

Formosa Plastics Group (FPG, 台塑集團), one of the leading conglomerates in Taiwan, has decided to expand its investment in a joint steel venture in Vietnam, which is expected to begin production by the end of June.

Through five of FPG's major subsidiaries and other units, the conglomerate is to participate in the US$1 billion rights issue for Formosa Ha Tinh Steel Corp., located in the Vung Ang Economic Zone in Ha Tinh Province, central Vietnam.

After the rights issue, the paid-in capital of the joint steel plant is expected to rise from the current US$4.5 billion to US$5.5 billion.

Currently, FPG owns a 70 percent stake in the Ha Tinh joint venture, while China Steel Corp. (中鋼), the largest steel maker in Taiwan, and Japan's JFE Steel Corp., own a 25 percent and a 5 percent stake, respectively.

The five FPG units -- Formosa Plastics Corp. (台塑), Nan Ya Plastics Corp. (南亞), Formosa Chemicals & Fibre Corp. (台化), Formosa Petrochemical Corp. (台化) and Formosa Taffeta Co. (福懋興業) -- and other FPG subsidiaries will participate in the rights issue in two stages.

In the first stage, which will involve US$500 million in new investments, the subsidiaries' participation will be based on their own shareholdings. Local media reported on Friday that China Steel does not plan to increase its investment in the joint venture through the rights issue.

Formosa Plastics, Nan Ya Plastics, Formosa Chemicals and Formosa Petrochemical each own 11.432 percent in the joint venture, while Formosa Taffeta holds 3.847 percent. The five are listed on the Taiwan Stock Exchange.

Construction of the Ha Tinh complex started in December 2013. In addition to the steel production facility, the project includes port and power plant facilities, scheduled to be completed by the end of 2020.

The steel mill, which is the largest in Southeast Asia, is the largest-ever foreign investment in Vietnam and also the first time FPG has built a steel production site overseas.

The conglomerate said that the first furnace at the Ha Tihn complex is expected to start operation by the end of June and the new investment will be used to expand production capacity and protect the environment.

The operation of the steel mill has been repeatedly delayed by anti-Chinese protests and pollution charges.

The FPG steel complex was one of the targets of anti-Chinese protests staged by Vietnamese workers in May 2014 over China's deployment of a US$1 billion oil rig in disputed waters in the South China Sea.

In June 2016, the joint venture was found to be discharging pollutants, which killed fish along a 130-mile stretch of the coast, sparking massive protests. As a result, FPG paid more than US$500 million in pollution charges.

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