UPDATE 2-Thailand's Siam Cement plans $3.5-4 bln Vietnam plant

(Adds analyst comment, share prices, Vinachem statement)

By Viparat Jantraprap

BANGKOK, March 20 (Reuters) - Siam Cement (SCC.BK), Thailand's top industrial conglomerate, said on Thursday it would join Vietnamese firms to build a $3.5-4 billion petrochemicals plant in southern Vietnam to open in 2011, sending its shares up.

Siam Cement subsidiaries would own 71 percent in the plant and Vietnam Oil, Gas Group, also known as Petrovietnam, and Vietnam National Chemical Corporation (Vinachem) would have the rest, SCC said in a letter to the Thai stock exchange.

The plant would be built at Long Son in Ba Ria-Vung Tau province, next to the site of Vietnam's third refinery, and would supply other industries in Vietnam such as automotive, consumer goods packaging and aluminium.

The deal, through SCC's Vina SCG Chemicals and its 44.7 percent-owned Thai Plastic and Chemicals TPC.BK, Thailand's top polyvinyl chloride (PVC) maker, needs Vietnamese government approval.

The plant would start in 2011, making a small amount of PVC. Once completed in 2013, the complex would have annual capacity to produce 1.65 million tonnes of olefins, 1.45 million tonnes of polyolefins and 280,000 tonnes of chlor-alkali.

It would also have capacity to make 400,000 tonnes of VCM plastics and 330 tonnes of EDC plastics.

Vietnam now imports all the olefins it needs and bought almost one million tonnes in 2007, Kim Eng Securities analyst Surachai Pramualcharoenkij said.

Its domestic olefins consumption was expected to rise about 10 percent per year and the plant would help Vietnam cut out most of its olefins imports, he said.

SHARE BOOST

Siam Cement shares were nearly 1 percent higher at 212 baht at the midday break after falling almost one percent in early trade due to investor concerns Siam Cement would cut dividends to help finance the big investment, a KGI Securities analyst said.

The main index .SETI was down 1 percent.

"It's a mixture of positive and negative news for Siam Cement. Investors have long favoured the stock due to its high dividend payout, but now the company may have to save more money for the investment," she said.

Siam Cement was expected to pay a 12 baht dividend a share over the next two years, compared with 15 baht in 2007, she said.

"The Vietnam plant will about double petrochemical capacity of Siam Cement when completed. That means a big increase in its petrochemicals earnings," she said of earnings which now contribute 40-50 percent of SCC's income. "It's too early for an earnings upgrade, but maybe after the project gets approval."

SCC said it was still working on the costs and had set an initial investment of $3.5-4.0 billion. Vinachem, its partner, said in a separate statement the plant would cost $3.79 billion.

Siam Cement group has invested in Vietnam since 1990 and has petrochemicals, paper, ready-mixed concrete, building materials and distribution businesses there. ($1=31.24 Baht) (Editing by Michael Battye & Jan Dahinten)