SINOCHEM Energy, a unit of China’s State-owned Sinochem Group, has filed for a Hong Kong initial public offering (IPO) of about US$2 billion, as the group seeks to raise capital amid a shift to higher-value businesses, including petrochemicals production.

Sinochem Energy operates the group’s oil and petroleum products trading, refining, storage and logistics, as well as distribution and retail businesses, but not its struggling upstream business that includes overseas oil and gas production.

The proposed float comes amid a push by the Chinese Government to inject new life into bloated State-owned enterprises by encouraging private capital investment in such enterprises.

Sinochem Group is set to merge with State-owned ChemChina, which in 2016 agreed to buy Swiss pesticides and seeds group Syngenta for US$43 billion.

The Sinochem-ChemChina deal will create the world’s biggest industrial chemicals firm worth around US$120 billion, to be led by Sinochem chairman Frank Ning.

Under his leadership, several Sinochem units have been given more leeway in their expansion plans and more support for tapping capital markets for fundraising.

Hit by low oil prices over the last few years, Beijing-based Sinochem Group has aimed to shift from exploration and production to value-added refining and retailing businesses.

Sinochem Energy said in its filing it plans to expand its key refining asset, the Quanzhou refinery in the southern province of Fujian, to 300,000 barrels per day (bpd), from 240,000 bpd now.

Sinochem Energy’s profit increased 24 percent to 5.23 billion yuan (US$766 million) in 2017, while its revenue rose 50 percent to 392 billion yuan, the IPO prospectus showed.

(SD-Agencies)