4. Business Operation of the Company

Business Segments

Polyester Value Chain

The chart below summarizes the polyester value chain, outlining the
steps from processing crude oil to polyester polymer based products used
in applications for fast moving consumer goods “FMCG”. The polyester
value chain lies at the heart of our everyday life, found in numerous
consumer items. Our main products are PET (Polyethylene Terephthalate),
Fibers and Yarns, PTA (Purified Terephthalic Acid), and MEG
(Monoethylene Glycol).

[]

Polyester value chain supplies products to daily or consumer staples and
has continuously seen annual growth in demand on a global basis. PET
resin is used mainly for making PET bottles for packaging of beverages,
carbonated soft drinks, water, energy drinks, juices, tea, sauces and
others, and also for packaging of food and medicines. Fibers and yarns
are used mainly for clothing and also has applications in home
furnishings and industrial applications. PET resin and fibers and yarns
are the lowest cost materials in their product category. The demand
growth is both organic and from substitution of other products. PTA and
MEG are the key raw materials for both PET resins and fibers and yarns
therefore their demand grows in line with their application. Polyester
value chain is a bridge between oil and petrochemicals to fast moving
consumer goods “FMCG” as illustrated below:

[]

Source: Company

As driven by the demand consistency of the FMCG market, integrated
margins in the polyester value chain remain relatively stable throughout
the years, resilient to changes in crude oil price movement and global
GDP growth rates. The polyester chain lies at the heart of our everyday
life, found in numerous consumer items. As a result, driven by the
demand consistency of the FMCG market, exhibit little (if any)
volatility, unlike pure upstream products in the olefins and aromatics
chain.

[]

Business Overview

Introduction

Indorama Ventures (SET: IVL) remains the world’s largest Polyester Value
Chain producer, with 41 operating sites in 15 countries across four
continents providing value-added and differentiated products and
services to the fast-moving consumer goods industry. Our executives all
have a proven track record.

IVL has integrated businesses that are aligned to create a sustainable
value proposition. IVL’s customer orientation, global reach and scale
allow us to benchmark ourselves globally to enhance operational
excellence.

The new factor that will provide a broader portfolio of products for
customers is in innovation, where the bottom line and sustainability can
be grown. Investment in research and development will provide customers
with new products and services that will enhance our offering and
complete the loop as a one-stop center for global requirements.

Business Description

The term Polyester can be broken into poly, meaning many, and ester, a
basic organic chemical compound. The principle ingredients used in the
manufacture of polyester are purified terephthalate acid, derived from
Paraxylene, a part of the aromatics chain leading backwards into crude
oil, and monoethylene glycol, part of the olefins chain that leads
backward to crude oil or natural gas. The chemical process that produces
the finished polyester is called polymerization. Indorama Ventures
Public Company Limited (IVL) is one of the world’s foremost producers in
the Polyester industry.

IVL is a bridge connecting the oil and gas industry with fast moving
consumer goods (FMCG) producers. There is less volatility than up-stream
manufacturers, with constant demand from downstream customers.

The industry norm is to have long term volume contracts with customers,
normally of one to three years; however the pricing is adjusted monthly,
to compensate for upstream volatility according to an agreed mechanism.
The system indicates IVL’s ability to pass through all price movements
to customers.

This mechanism implies that crude oil and its derivative raw materials
used to produce PET and Polyester fibers have low impact on the business
except in the case that there is a sharp rise or fall in the price of
such materials within a short period, entailing an adjustment in the
cost of inventory to reflect market prices.

Raw material prices have a modest effect on the price of a bottle of
carbonated soft drinks. This is because the actual cost of the PET in a
two liter bottle is only about 4% of the total. Also, Polyester fiber is
around 5% of the cost of a sports shirt, therefore fluctuations in price
have a minor or insignificant effect on customers. Due to the undulating
nature of the prices having little impact on the business, the Company
instead maintains a spread, the difference between the price of the raw
materials and the selling price.

Industry and Competition

For convenience, Indorama Ventures divides the world into geographical
areas where it conducts business: Asia, Europe, North America, Africa
and the Rest of the World (ROW). The company has 41 facilities in 15
countries on four of the world’s continents. At this time, the company
is a truly global PET player.

As the production of staple products like PET and Fibers and Yarns is
essentially a low margin business, companies compete to keep their costs
down to the full extent possible. Due to IVL’s focus on efficiency it is
considered to be in the lowest cost quartile of its business segment in
every major market where it operates.

The company holds integrated assets throughout the Polyester Value
Chain, from PTA and MEG, termed Feedstocks here, down to PET and Fibers
and Yarns as well as packaging. Several of our peers also integrate to
varying degrees as this strategy is acknowledged as providing the most
value over time. In terms of capacity, IVL is the world’s second largest
value chain producer but the largest in terms of PET only.

[]

Source: PAL

Today, IVL estimates that its total global market share for PET is
approximately 14% by capacity. In North America and Europe, the company
holds approximately a third of the market share by capacity.

Most of the largest manufacturers of PET also make a variety of other
chemicals that are often unrelated to PET and Polyester. There are two
key peers whose production of PET and Fibers and Yarns are
proportionately similar to IVL, Alpek and M&G.

Alpek, itself a subsidiary of Mexico’s Alfa Group, is the largest
petrochemical company in Mexico and owns PET businesses in the United
States of America through its subsidiary DAK Americas, which was set up
in 2001. DAK Americas acquired PET and Polyester manufacturing
facilities in the U.S.A. from DuPont.  DuPont, Alfa and later acquired
PET businesses from Eastman Chemical, expanding further into Mexico and
Argentina. It currently has seven manufacturing sites. (Source:
http://www.dakamericas.com and http://www.alpek.com and Company data as
of December 2012.)

Founded in 1953 as a packaging company, Mossi and Ghisolfi (M&G)
produces PET resin in Italy, the US, Mexico and Brazil. M&G Group has an
annual turnover of approximately USD 3 billion. Its PET unit develops
and produces PET, mostly for packaging applications. M&G has
approximately 1.73 million tons per annum of installed capacity, and
manufacturing locations in Brazil, Mexico, USA and Italy. M&G is still a
privately-held company. (Source: M&G website http://www.gruppomg.com and
Company data as of December 2012.)

Other large peers include India’s Reliance, which focuses more on other
chemicals as far upstream as oil and gas production. China Petrochemical
Corporation (Sinopec Group) is a large state-owned Chinese player that
is again more heavily focused on upstream products. Other peers like
Hengyi, Tongkun and Nan Ya have small PET capacities, while others like
Far Eastern New Century San Fangxiang (SFX) target more the Asian and
especially Chinese markets.

Due to the competitive, low cost nature of the PET business, the
distances between continents and the barriers to entry in developed
markets, there are not many companies exporting to Europe and North
America, which are the largest consuming markets.

[]

Source: PAL

In North America there are five key players and the three largest have
majority share of the market. This has come about as large Western
players sought to exit an industry that had gone, for them, from a high
margin to a low margin product and instead focus on high margin
products. In North America, IVL has approximately 33% of the North
American market and ranks second in terms of capacity. North America is
a market where supply and demand are somewhat balanced. It is also a
region where the discovery and exploitation of shale gas is expected to
lower some input costs for manufacturers over time. As a producer of MEG
in North America, IVL is expecting to benefit from lower gas prices.

In Europe there are six major players, with four of them holding 69% of
the total market. IVL is the largest PET producer in Europe, holding
approximately 33% of the total Europe market share.

In both the USA and Europe, there is a general import duty on PET. When
the cost of international shipping charges and domestic rail charges are
added few players outside the continent can deliver at competitive
prices. There are also anti-dumping charges on some companies or
countries. Moreover, producers such as IVL that have manufacturing
capacity inside these continents are able to apply import price parity.
This ensures that margins are relatively stable and that domestic
manufacturers enjoy some protection in return for their investment in
these markets.

In Nigeria, where IVL has a bottle grade PET facility, there is very
little competition as PET resin has traditionally been imported from
West Africa. According to industry source, there is one PET manufacture
in South Africa supplying the indigenous market.

Key Strategies

[]

Typically, the Company has several strategies for ensuring that it is in
the lowest cost quartile in every market it operates. The Company’s
economies of scale, integration into feedstock or co-location with
feedstock providers and proximity to customers ensures that the Company
minimizes its logistics overhead.

IVL has acquired and built world scale assets that lower manufacturing
costs while sustaining high utilization rates. IVL derives efficiency
and a better position on the cost curve through the use of
state-of-the-art technology.

Accretive Capacity

IVL has followed a strategy of both buying and building capacity
globally. Both methods have their merits. Acquisition provides the
company with cash flow and customers quickly while greenfield projects
provide the Company with an opportunity to build a more efficient plant
using state-of-the-art technology. Amidst these extremes, brownfield
expansions allow the company to build a new facility with the latest
technology on a currently-owned site, thus saving on certain costs such
as infrastructure and some facilities already in place.

Vertical Integration

Vertical integrating into feedstocks refers to the two main feed stocks
for PET (Polyethylene Terephthalate) and Fibers and Yarns; PTA (Purified
Terephthalic Acid) and MEG (Monoethylene Glycol), with PX (Paraxylene)
an important raw material for the production of PTA. The Company favors
a business model where physical infrastructure is shared between
co-located PET and Feedstock facilities.

Integration insulates the Company somewhat from sector phasing and
improves the quality and predictability of earnings. However, virtual
integration through co-location with key raw material suppliers enhances
logistical and operational efficiency, cost competitiveness and raw
material security without extra investment. It enables responsiveness to
customers and market developments, as well as allowing stability in
volumes and profits. IVL obtains its raw materials from established
producers with volume contracts to guarantee its supply. PTA and PET or
PTA and Polyester site co-locations costs can be reduced due to the
reduction of logistics, the sharing of common services, the reduction of
fixed costs associated with raw materials procurement, sales and
marketing and administrative functions. Integration gives IVL the
ability to maintain higher capacity utilization as compared to merchant
PTA suppliers at all times.

IVL has PET facilities that are fully-integrated into PTA in the
Netherlands, Italy and Thailand and co-located with PTA suppliers in
Alabama (USA), Poland and Indonesia. Approximately 60% of IVL’s PTA
production today is used internally.

Proximity to Customers and Suppliers

IVL made a strategic decision to be close to its suppliers and customers
if possible in order to develop an intimate relationship based on
timeliness and low cost. The Company sought to eliminate wherever
possible the cost of international transportation and accompanying
barriers to entry, thus keeping costs down while making deliveries to
customers faster. Similarly, by situating as close to suppliers as
possible, the Company can lower the cost of deliveries, maintain a lower
inventory level than if delivery distances were greater.

Cost Optimization

All of IVL’s management understands the importance of keeping costs to a
minimum and therefore facilities globally are de-bottlenecked and
optimized to ensure they are run efficiently. This includes adjusting
equipment to lower electrical consumption.

Differentiated Products Portfolio Expansion

While the majority of IVL’s business remains with staple products, the
Company has now entered into more value-added and differentiated
products so as to be able to offer its customers a broader portfolio and
therefore more choice from a single source. Such value-added products
tend to have more stable margins and lower volatility over time,
providing the Company with a more solid base for its business.

Sustainability

Sustainability is an important strategy at IVL. The Company recognizes
the need to lessen its impact on the surrounding communities and
environment, which in turn will lead to the long-term sustainability of
its operations. IVL has been active in lowering energy usage at its
plants and in performing CSR activities with local communities to ensure
that our interactions are always positive.

The Company publishes an annual sustainability report that goes into
detail about its business and projects to enable stakeholders to
understand the important emphasis placed on these activities.

PET Business

PET Business Overview

Our PET business is part of our core polyester value chain business.
Beginning with one manufacturing plant, we have grown today to operate
across the four major consuming continents of North America, Europe,
Africa and Asia. Our PET business comprises the production and sale of
PET resin, a plastic polymer resin primarily used for beverage
containers and food packaging, for packaging of pharmaceutical and
household products and in industrial packaging applications. We also
produce PET packaging in the form of preforms, bottles and closures
through two production facilities including Petform, a joint venture
with Serm Suk Pcl. and Beverage Plastics.

We entered the PET business in 1995 through the establishment of
Indorama Polymers, the first PET resin manufacturing facility in
Thailand, with an initial installed capacity of 20,000 tonnes per annum.
Our PET installed capacity has since increased significantly to 3.8
million tonnes per annum as of December 31, 2012, comprising of five PET
facilities in Asia (Thailand, China and Indonesia), five PET facilities
in Europe (the Netherlands, the United Kingdom, Lithuania, Poland and
Italy) , four PET facilities in North America (the United States and
Mexico), and one PET facilities in Africa (Nigeria). Our significant PET
capacity growth was achieved primarily through:

-   The acquisition of StarPet, a PET facility in Asheboro, North
    Carolina, U.S.A. from Tiepet Inc.;

-   The acquisition of a PET facility in Rotterdam, the Netherlands and
    a PET facility in Workington, United Kingdom from the Eastman
    Chemical Company;

-   The construction of the Orion Global PET facility in Lithuania,
    Europe’s largest PET resin plant;

-   The construction of AlphaPet PET facility, a PET plant in Decatur,
    Alabama, U.S.A.;

-   The acquisition of a PET facility in Kaiping city, Guangdong, China
    from Guangdong Shinda UHMWPE Co., Ltd.;

-   The acquisition of PET facility’s in Indonesia and Poland from SK
    Chemicals; and

-   The acquisition of PET facility’s in Spartanburg, South Carolina,
    USA and a PET facility in Queretaro, Mexico from Invista S.a’ r.l.

-   The greenfield expansion of PET facility in Port Harcourt, Nigeria;
    and

-   The acquisition of PT Indorama Polypet, PET facility in Cilegon,
    Indonesia from PT Polypet Karyapersada

We have two PET packaging companies; Petform and Beverage Plastics.
Petform, owned with a partner, has the annual installed capacity to
produce 1,361 million preforms, 600 million bottles and 1,548 million
closures. The facility is co-located with one of our PET resin plants in
Thailand. In 2012, We have subsequently completed the greenfield
expansion of Petform facility in Rayong. The another one, Beverage
Plastics, owned by our indirectly-owned subsidiary, has the annual
installed capacity to produce 587 million preforms, 172 million bottles
and 915 million closures.

As of December 31, 2012, we have completed several acquisitions
announced in 2011 and 2012, following which we became the largest PET
resin producer in the world with an aggregate installed production
capacity of 3.8 million tonnes per annum.

PET Products

We produce a variety of PET resins, including hot-fill, high and low
intrinsic viscosity, quick heat and general grade, to serve a variety of
markets including carbonated soft drinks, bottled water, other
beverages, food and other applications.

PET Production Process

PET resin can be produced from polyester polymer melt. The chart below
summarises the polyester polymer melt production process.

[]

Polyester polymer melt is then converted into PET resin either through a
conventional solid state process or through a newer technology
melt-to-resin process. Under the conventional solid state
polycondensation process, the polyester polymer melt is extruded in
strands, which are cooled down quickly by water. After solidification,
the strands are cut into small pellets, dried and further crystallized
by heating in a reactor under specific temperature and pressure
conditions under a nitrogen flow. Under the melt-to-resin process using
new technology reactors, the polycondensation process is completed
during the melt phase, resulting in the formation of pellets without
going through the solidification process. Other than our AlphaPet PET
facility, which uses the melt-to-resin process, all of our other PET
facilities use the conventional solid state poly condensation process.

PET Production Facilities

The following table describes our PET production facilities as of
December 31, 2012.

  -------------------- --------------- ------------- ---------------------
  Production Facility  Location        Installed     Production Technology
                                       Capacity⁽¹⁾   
                                       (tonnes per   
                                       annum)        

  AlphaPet PET         Decatur,        432,000       Uhde Inventa Fischer
  Facility             Alabama, U.S.A.               MTR

  StarPet PET Facility Asheboro, North 252,000       Zimmer / Buhler
                       Carolina,                     
                       U.S.A.                        

  Orion Global PET     Klaipeda,       241,000       Inventa / Buhler
  Facility             Lithuania                     

  IRP Rotterdam PET    Rotterdam, the  418,000       Inventa / Buhler
  Facility             Netherlands                   

  IRP Workington PET   Workington,     168,000       Zimmer / Bepex
  Facility             United Kingdom                

  IRP/AsiaPet PET      Lopburi,        178,000       Zimmer and Sinco
  Facilities ⁽²⁾       Thailand                      

  Ottana Polimeri      Ottana, Italy   161,000       Dow
  S.R.L.⁽³⁾                                          

  GIVL PET Facility    Kaiping, China  522,000       Inventa/ Buhler

  Arteva PET Facility  Queretaro,      478,000       Invista/ Sinco
                       Mexico                        

  Auriga Facility -    Spartanburg,    387,000       Invista/ Bepex
  PET Resin Line       South Carolina,               
                       U.S.A.                        

  IVL Wloclawek PET    Wloclawek,      153,000       Inventa/ Buhler
  Facility             Poland                        

  IVL Tangerang        Tangerang,      88,000        Hitachi/ Buhler
  Facility - PET Resin Indonesia                     
  Line                                               

  Port Harcourt SSP    Nigeria         84,000        Buhler
  Facility                                           

  PT Indorama Polypet  Cilegon,        100,800       Zimmer
  Facility - PET Resin Indonesia                     
  Line                                               

  Petform PET          Lopburi,        -⁽⁴⁾          Husky (preforms and
  Packaging Facility   Thailand                      closures) Sidel
                                                     (bottles)

  Beverage Plastics    Northern        -⁽⁵⁾          Husky (preforms and
  Packaging Facility   Ireland, United               closures) Sidel
                       Kingdom                       (bottles)

  Total ⁽⁶⁾                            3,753,800     
  -------------------- --------------- ------------- ---------------------

(1) The capacity of plants have been re-rated to reflect the
    de-bottlenecking projects taken-up by the various plants from
    time-to-time.

(2) Comprises the Indorama Polymers PCL PET facility and the AsiaPet
    Amorphous PET facility, each with a capacity of 178,000 tonnes per
    annum and together forming a single PET resin line. The AsiaPet
    (Thailand) Ltd. Amorphous PET facility produces amorphous PET, all
    of which is used in the Indorama Polymers PCL PET facility to
    produce PET resin.

(3) 50/50 Joint venture investment

(4) Preforms—1,361 million per annum, bottles—600 million per annum, and
    closures—1,548 million per annum.

(5) Preforms—587 million per annum, bottles—172 million per annum, and
    closures—915 million per annum.

(6) Excludes capacity of Petform (Thailand) Ltd. and Beverage Plastics

    PET Sales and Marketing

We have PET sales and marketing teams in each of the regions in which we
operate, which are overseen by our sales and marketing head office in
Thailand. We classify our main customers for PET into four main groups:

-   Well-known brand name beverage companies with their own conversion
    plants to produce PET bottles;

-   Well-known brand name beverage companies who sub-contract the
    production of PET bottle to converters using PET resin purchased by
    such beverage companies

-   PET resin traders; and

-   PET converters who use PET resin to manufacture preforms, bottles,
    sheets and other PET packaging to service the needs of end users.

We sell our PET resin primarily through direct sales to end-use
customers. A small proportion of our sales take place through agents and
traders.

We are the world’s largest PET resin producer and the only PET resin
producer with production facilities in Asia, North America and Europe,
which allows us to market our PET resin products globally to customers
for their world-wide PET requirements. Our marketing activities include
regular meetings with our customers to understand their requirements and
maintain good relationships as well as providing customer service.

PET Competition

The global market for PET resin is highly competitive, involving a large
number of producers located throughout the world, some of whom may have
greater financial resources than us. Because PET resin is a commodity
product, competition in the PET resin market is predominantly based on
price and, to a lesser degree, on reliability and consistency of product
quality and specifications and lead times to product delivery. We
believe our vertically intergrated operations provide us with a
competitive advantage because we have security of raw materials sourcing
and some cost control, over our principal raw material, PTA.

The European Union has adopted anti-dumping duties on PET resin imports
from various Asian countries, including Thailand. In addition, the U.S.
has imposed import duties on PET resin imports from various countries,
including Thailand, at a rate between 3.0% and 6.5%. These anti-dumping
duties and import duties, together with the transportation costs in
shipping PET resin from the country of production to these markets, make
it more difficult for imported PET resin to compete with locally
produced PET resin. Therefore, we believe we have a competitive
advantage in having PET resin production facilities in Europe and in the
U.S.

We are the largest PET producer globally, No.1 in Europe, No.2 in North
America and No.4 in Asia. Our principal competitors in the European
market are La Seda de Barcelona, Equipolymers and Neo Group. Our
principal competitors in the North American market are Alpek (DAK
Americas LLC) and M&G Group. Our competitors in the Thai market are Thai
Shinkong Industry Corp., Thai PET Resin Co., Ltd. and Bangkok Polyester
Public Company Limited. Although PET technology is available through
commercial licenses, we believe the capital investment required to
achieve profitability through economies of scale may inhibit new
entrants to the market.

Fibers and Yarns Business

Polyester Fibers and Yarns

Polyester was discovered in the forties and has been manufactured on an
industrial scale since 1947. Polyester fibers are the first choice for
apparel and are used in trousers, skirts, dresses, suits, jackets,
blouses and outdoor clothing.

Blends with cotton and virgin wool are very popular. They are often
referred to as the "classical blend". This is normally a combination of
55% polyester and 45% wool.

Polyester fibers are formed from a chemical reaction between an acid and
alcohol. In this reaction, two or more molecules combine to make a large
molecule whose structure repeats throughout its length. Polyester fibers
can form very long molecules that are very stable and strong.

Polyester fibers are produced by the melt spinning process. Raw
materials are heated to a spinning mass, which is then pressed through
spinnerets (similar to a sieve). Manufacturing techniques are now
developed to the point where they can produce round, oval or angular
profiles, making them firm to the touch.

Polyester fibers are particularly resistant to light and weather and can
withstand climatic effects, being as light or as fine as weather
demands. Polyester fibers have good moisture transport and dry quickly.

Material in 100% polyester, or blends with an appropriately high
proportion, is very crease-resistant and retains shape even when
affected by moisture. Heat treatment results in permanent creases in
trousers and skirts.

Major Uses of Polyester Fibers and Yarns

Polyester fibers are most commonly used for apparel, from sports wear to
high fashion; home textiles, such as bedding and carpets; non-woven
materials like surgical gowns; technical textiles like filters and
automotive uses like carpets and insulation.

Olefin Fibers and Yarns

This is a manufactured fiber in which the fiber forming substance is any
long-chain synthetic polymer composed of at least 85% by weight of
ethylene, propylene, or other olefin units. Italy began production of
olefin fibers in 1957. U.S. production of olefin fibers began in 1960.
The first commercial producer of an olefin fiber in the United States
was Hercules, Inc. (now FiberVisions).

Usually polymer granules are fed to an extruder which melts the polymer
which is then pumped through a spinneret. The filaments are cooled in an
air stream before being wound on a package or collected in cans. Because
the fibers are difficult to dye, colored pigments are often added to the
polymer stream before extrusion to produce colored fibers.

Propylene, when polymerized, creates a crystalline polypropylene
polymer. The fibers made with these polymers can be used in furnishing,
apparel and industrial products. Olefin fibers provide warmth without
much weight. Olefin is abrasion, stain, sunlight, fire, and chemical
resistant. It does not dye well, but has the advantage of being
colorfast since pigments are added inside the fibers. Since Olefin
fibers have a low melting point, they can be thermally bonded. One of
the most important properties of Olefin fibers is its strength, which
can be tailored for different applications. It keeps its strength in wet
or dry conditions. Olefin fibers can be multi- or monofilament and
staple, tow, or film yarns. The cross section is usually round, but can
be modified for different end uses.

Bicomponent Fibers

Bicomponent fibers can be defined as "extruding two polymers from the
same spinneret with both polymers contained within the same filament.” A
close relative is "co-spun fiber", which is a group of filaments of
different polymers, but a single component per filament, spun from the
same spinneret. The term "conjugate fibers" is often used, particularly
in Asia, as synonymous with bicomponent fibers. The main objective of
producing bicomponent fibers is to exploit capabilities not existing in
either polymer alone. Bicomponent fibers are commonly classified by
their fiber cross-section structures as side-by-side, sheath-core,
islands-in-the-sea and citrus fibers or segmented-pie cross-section
types. Bicomponent fibers made of polyethylene sheath and polypropylene
core are important fibers for the nonwoven fabric market.

Major Uses of Polyolefins Fibers

The main applications include:

Nonwoven fabrics for diapers, feminine care and adult incontinence
products (as top sheet, back sheet, leg cuffs, elastic waistband,
transfer layers); in spun laced nonwoven products like medical
disposable textiles, filtration products or in air-laid nonwoven
structures as absorbent cores, and wet wipes.

In terms of apparel, olefin fibers are used in sports and active wear,
socks, thermal underwear and as lining fabrics, while in the home they
are often used by itself or in blends for indoor and outdoor carpets,
carpet tiles, and carpet backing. The fiber can also be used in
upholstery, draperies, wall coverings, slipcovers, and floor coverings
as well as heat-sealable paper like tea- and coffee-bags.

In heavier applications, the fibers are often used for interior fabrics,
sun visors, arm rests, door and side panels, trunk and parcel shelves,
while olefin creates carpets; ropes, geo-textiles that are in contact
with the soil, filter fabrics, bagging and concrete reinforcement.

How Worsted Wool is Made

The name Worsted derives from Worstead, a village in the English county
of Norfolk. Worsted wool fabric is typically used in the making of
tailored garments such as suits, as opposed to woolen wool which is used
for knitted items such as sweaters. The essential feature of worsted
yarn is straight, parallel fibers. Worsteds differ from woolens, in that
the natural crimp of the wool fiber is removed in the process of
spinning the yarn. IVL produces wool from Merino sheep. These sheep are
sought after for their coats, which are said to produce the finest,
softest wool available.

While many forms of wool require that the fiber undergo a spinning
process, the production of worsted wool follows a slightly different
path. Rather than going directly into a spinning process, the wool is
first combed in a carding process. This is where wool fibers are
separated and prepared for spinning to remove any short and brittle
fibers from the wool, leaving only the longer strands of the fiber to
undergo the spinning process, producing a smooth yarn that possesses a
higher durability.

Owing to the strength of worsted wool, the fibers can be woven into a
finer material that is more crease resistant than many other fabric
choices making it an ideal choice for garments that need to hold their
shape. Worsted wool has been a popular choice for men’s trousers,
pleated skirts for women, and both men’s suits and sport jackets.
Because worsted wool is so durable, it wells very well and also drapes
easily, making it an ideal fabric for all sorts of garments.

Major Uses of Worsted Wool Yarns

Worsted Wool produced by IVL is used in high-end suiting for both men
and women.

Polyester Production Facilities

The following table describes our polyester production facilities as of
December 31, 2012.

+------------------------+------------+---+-----------+---+------------------+
| Production Facility    | Location   |   | Installed |   | Production       |
|                        |            |   | Ca        |   | Technology       |
|                        |            |   | pacity⁽¹⁾ |   |                  |
|                        |            |   |           |   |                  |
|                        |            |   | (tonnes   |   |                  |
|                        |            |   | per       |   |                  |
|                        |            |   | annum)    |   |                  |
+------------------------+------------+---+-----------+---+------------------+
|   Indorama Polyester   | Nakhon     |   | 116,000   |   | Inventa-Fischer  |
|   Industries           | Pathom,    |   |           |   |                  |
|   Nakhon Pathom        | Thailand   |   |           |   |                  |
|   Facility             |            |   |           |   |                  |
+------------------------+------------+---+-----------+---+------------------+
|   Indorama Polyester   | Map Ta     |   | 183,600   |   | Tuntex           |
|   Industries           | Phut,      |   |           |   |                  |
|   Map Ta Phut Facility | Thailand   |   |           |   |                  |
+------------------------+------------+---+-----------+---+------------------+
|   Auriga Facility –    | Sp         |   | 71,000    |   | Invista          |
|   Polyester line       | artanburg, |   |           |   |                  |
|                        | South      |   |           |   |                  |
|                        | Carolina,  |   |           |   |                  |
|                        | USA        |   |           |   |                  |
+------------------------+------------+---+-----------+---+------------------+
|   IVL Karawang         | Karawang,  |   | 36,000    |   | Teijin Seiki     |
|   Polyester Facility   | Indonesia  |   |           |   | Murata           |
+------------------------+------------+---+-----------+---+------------------+
|   IVL Tangerang        | Tangerang, |   | 73,600    |   | Hitachi/ Teijin  |
|   Facility – Polyester | Indonesia  |   |           |   | Seiki            |
|   line                 |            |   |           |   |                  |
+------------------------+------------+---+-----------+---+------------------+
|   Trevira – Polyester  | Bobingen & |   | 120,000   |   | Hoechst/         |
|   line⁽²⁾              | Gubem,     |   |           |   | Barmag/Fleissner |
|                        | Germany    |   |           |   |                  |
+------------------------+------------+---+-----------+---+------------------+
|   Wellman              | Mullagh,   |   | 153,000   |   | Wellman          |
|   International –      | Ireland,   |   |           |   |                  |
|                        |            |   |           |   |                  |
|   Recycled Polyester   | Spijik,    |   |           |   |                  |
|                        | N          |   |           |   |                  |
|                        | etherlands |   |           |   |                  |
|                        | & Verdun,  |   |           |   |                  |
|                        | France     |   |           |   |                  |
+------------------------+------------+---+-----------+---+------------------+
|   Fibervision –        | Dul        |   | 221,000   |   | Fibervisions     |
|   Polyester line       | uth,Athens |   |           |   | (Hercules)       |
|                        | and        |   |           |   |                  |
|                        | Covington, |   |           |   |                  |
|                        | USA,       |   |           |   |                  |
|                        | Varde,     |   |           |   |                  |
|                        | Denmark &  |   |           |   |                  |
|                        | Suzhou,    |   |           |   |                  |
|                        | China      |   |           |   |                  |
+------------------------+------------+---+-----------+---+------------------+
|   Indorama Polyester   | Map Ta     |   | 16,000    |   | Toyobo/Fleissner |
|   Industries           | Phut,      |   |           |   |                  |
|   Map Ta Phut          | Thailand   |   |           |   |                  |
|   Facility - BICO      |            |   |           |   |                  |
+------------------------+------------+---+-----------+---+------------------+
|   Total                |            |   | 990,200   |   |                  |
+------------------------+------------+---+-----------+---+------------------+

(1) Effective January, 2011, the capacity of plants have been re-rated
to reflect the de-bottlenecking projects taken-up by the various plants
from time-to-time.

(2) 75% JV by acquisition of facility on July 1, 2011.

Polyester Sales and Marketing

Our main customers for polyester products are companies producing
textiles for apparel, companies producing home textiles and industrial
companies such as automotive companies and packaging film producers. Our
polyester sales and marketing head office is located in Thailand and is
responsible for sales and marketing activities relating to our customers
worldwide. We sell our polyester products directly to our customers for
domestic sales in Thailand and through sales agents for our export
sales.

Our marketing activities include regular contact with our customers to
understand their requirements and maintain good relationships as well as
providing customer service.

Polyester Competition

Competition in the global polyester industry is characterized by the
presence of large diversified industrial companies, as well as a large
number of relatively small niche players with a capacity of less than
10,000 tonnes per annum. Larger polyester producers usually focus on
high-volume standard fibers for sale in domestic markets where the level
of competition is high and where competition is predominantly based on
price and, to a lesser degree, on consistency of product quality and
with the larger polyester producers for commodity polyester products by
continuing to focus on increasing the production of non-commodity
products so that they comprise approximately half of our total polyester
output.

Large polyester producers that focus on volume typically lack marketing
channels for the sale of niche products. Therefore, the level of
competition in niche product markets is moderate to low and pricing
pressure is typically lower than for polyester standard fibers or for
PET resin. In niche markets, competition is based more on the ability to
meet product quality and specifications and lead times to product
delivery.

The table below summarizes our competitors for our polyester products.

+------------------+---+-------------+---+---------------------------------+
| Product          |   | Thai        |   | Export Market                   |
|                  |   | Domestic    |   |                                 |
|                  |   | Market      |   |                                 |
+==================+===+=============+===+=================================+
| Film grade chips |   | Huvis-Korea |   | Toray-Korea, SK                 |
|                  |   |             |   | Keris-Indonesia, Mitsubishi     |
|                  |   |             |   | Chemical, Tejin – Japan         |
+------------------+---+-------------+---+---------------------------------+
| Fiber            |   | Kangwal     |   | Reliance, Formosa, Huvis, Far   |
|                  |   | Polyester,  |   | Eastern Textiles, Recron        |
|                  |   | Tejin       |   | Polyester (Reliance), Nan Ya,   |
|                  |   | Polyester,  |   | Alpek                           |
|                  |   |             |   |                                 |
|                  |   | Thai        |   |                                 |
|                  |   | Polyester   |   |                                 |
+------------------+---+-------------+---+---------------------------------+
| Yarn             |   | Kangwal     |   | Recron Polyester, Polyfinis –   |
|                  |   | Polyester,  |   | Indonesia, CFC China,           |
|                  |   | Tejin       |   | Xiangshang- China, Far Eastern  |
|                  |   | Polyester,  |   |                                 |
|                  |   |             |   |                                 |
|                  |   | Thai        |   |                                 |
|                  |   | Polyester   |   |                                 |
+------------------+---+-------------+---+---------------------------------+

Feedstock Business

For IVL, feedstocks mean PTA, MEG, EO derivatives and by products.

In full PTA is Purified Terephthalic Acid and it is an organic compound.
This colourless powder is a commodity chemical, used principally in the
manufacture of Polyethylene Terephthalate (PET), which is generally used
to make clothing and plastic bottles.

PTA Business

Terephthalic acid is an organic compound and a colorless solid. It is a
commodity chemical, used principally as a precursor to the polyester
PET, used to make clothing and plastic bottles. Several billion
kilograms are produced annually.

IVL entered the PTA business in 2008 with the strategy of developing raw
material integration so as to ensure an uninterrupted supply of raw
materials and capture better margins in the Polyester value chain. This
provides IVL with a cost competitive edge to the PET and Fiber
businesses. The Company’s PTA assets are strategically co-located with
downstream facilities in Thailand, Indonesia, the Netherlands and Italy.
A capacity of 2.4 million tonnes per annum (including joint ventures) at
five sites, in four countries on two continents.

How PTA is Made

Terephthalic acid is produced by the oxidation of Paraxylene (PX). The
commercial process utilizes acetic acid as a solvent together with a
catalyst composed of cobalt and manganese salts, with a bromide
promoter.

A radical chain reaction occurs in a series of intermediates, starting
with the oxidation of Paraxylene and finally to terephthalic acid (TA).
It is then further purified to make PTA.

Use of PTA

Most PTA is consumed as a feedstock of PET, however a few small niche
uses occur, such as in the analgesic drug oxycodone, which occasionally
comes as a terephthalate salt. More visibly, terephthalic acid is used
as a filler in some military smoke grenades creating a thick white smoke
when burned.

MEG Business

The other major feedstock produced by Indorama Ventures is monoethylene
glycol (MEG) which is an organic compound. In its pure form, it is an
odorless, colorless, syrupy, sweet-tasting liquid.

How MEG is Made

Monoethylene glycol is produced from ethylene (ethane), via the
intermediate ethylene oxide. Ethylene oxide reacts with water to produce
ethylene glycol.

Uses of MEG

The major end uses of ethylene glycol are as antifreeze for automobile
radiators, which accounts for over 50% of ethylene glycol's commercial
uses, and as raw material in the production of PET, which accounts for
40% of total ethylene glycol consumption globally. Besides automobiles,
MEG is often used as a medium in liquid cooled computers, chilled water
air conditioning systems and geothermal heating/cooling systems.

EO derivatives and by products business

Purified Ethylene Oxide Business

Ethylene oxide is industrially produced by direct oxidation of ethylene
in the presence of silver catalyst.

Use of PEO

Ethylene oxide is used in the production of detergents, thickeners,
solvents, plastics, and various organic chemicals such as ethylene
glycol, ethanolamines, simple and complex glycols, polyglycol ethers and
other compounds. Pure ethylene oxide is a disinfectant that is widely
used in hospitals and the medical equipment industry to replace steam in
the sterilization of heat-sensitive tools and equipment, such as
disposable plastic syringes.

PEO derivatives are used to manufacture various products such as soaps,
detergents, brake fluids, weed killer and urethane foam.

Ethylene oxide is one of the most important raw materials used in the
large-scale chemical production. Most ethylene oxide is used for
synthesis of ethylene glycols, including diethylene glycol and
triethylene glycol that accounts for up to 75% of global consumption.
Other important products include ethylene glycol ethers, ethanolamines
and ethoxylates. Among glycols, ethylene glycol is used as antifreeze,
in the production of polyester and PET, liquid coolants and solvents.
Polyethylene glycols are used in perfumes, cosmetics, pharmaceuticals,
lubricants, paint thinners and plasticizers. Ethylene glycol ethers are
part of brake fluids, detergents, solvents, lacquers and paints. Other
products of ethylene oxide include ethanolamines, used in the
manufacture of soap and detergents and for purification of natural gas.
Ethoxylates are reaction products of ethylene oxide with higher
alcohols, acids or amines. They are used in the manufacture of
detergents, surfactants, emulsifiers and dispersants.

TEG, DEG Business

Uses of TEG and DEG

Diethylene Glycol (DEG) is a by-product made together with MEG through
the processing of EO. DEG has broad applications and is used to
manufacture polyester polyols, unsaturated polyester resins, buffet
heaters, morpholine production, paints and coatings, plasticizers,
liquid laundry detergent, cement grinding and as an intermediate for
polyethylene glycol.

Triethylene Glycol (TEG) is a by-product made by processing EO. TEG is
mainly used for natural gas dehydration. The other applications are air
sterilizers, resin for windshield plate glass and as an intermediate for
polyethylene glycol. It is used as a plasticizer for vinyl. It is also
used in air sanitizer products. When aerosolized it acts as a
disinfectant. It is an additive for hydraulic fluids and brake fluids
and is used as a base for "smoke machine" fluid in the entertainment
industry.

PTA Production Process

The chart below summarises the PTA production process.

[]

Oxide & Glycol ProcessThe chart below summarises the EO/EG production
process.

[]

Feedstock Production Facilities

The following table sets out the key figures for our Feedstock
production facilities as of December 31, 2012.

+--------------------+---+-----------------+---+-----------+---+------------+
| Production         |   | Location        |   | Nameplate |   | Production |
| Facility           |   |                 |   | Ca        |   | Technology |
|                    |   |                 |   | pacity⁽¹⁾ |   |            |
+--------------------+---+-----------------+---+-----------+---+------------+
|                    |   |                 |   | (tonnes   |   |            |
|                    |   |                 |   | per       |   |            |
|                    |   |                 |   | annum)    |   |            |
+--------------------+---+-----------------+---+-----------+---+------------+
|   Indorama         |   |   Rayong,       |   | 771,000   |   | Invista    |
|   Petrochem PTA    |   |   Thailand      |   |           |   |            |
|   Facility         |   |                 |   |           |   |            |
+--------------------+---+-----------------+---+-----------+---+------------+
|   TPT              |   |   Map Ta Phut,  |   | 613,000   |   | Technimont |
|   Petrochemicals   |   |   Thailand      |   |           |   |            |
|   PTA Facility⁽²⁾  |   |                 |   |           |   |            |
+--------------------+---+-----------------+---+-----------+---+------------+
|   IRH Rotterdam    |   |   Rotterdam,    |   | 377,000   |   | Eastman    |
|   PTA Facility     |   |   the           |   |           |   |            |
|                    |   |   Netherlands   |   |           |   |            |
+--------------------+---+-----------------+---+-----------+---+------------+
| Ottana Polimeri    |   | Ottana, Italy   |   | 184,000   |   | Dow        |
| S.R.L. ⁽³⁾         |   |                 |   |           |   |            |
+--------------------+---+-----------------+---+-----------+---+------------+
|   Polyprima (4)    |   |   Indonesia     |   | 500,000   |   | Invista    |
+--------------------+---+-----------------+---+-----------+---+------------+
|   Indorama         |   |   Texas, USA    |   | 550,000   |   | Oldworld   |
|   ventures (Oxide  |   |                 |   |           |   |            |
|   & Glycol) EO/EG  |   |                 |   |           |   |            |
|   Facility         |   |                 |   |           |   |            |
+--------------------+---+-----------------+---+-----------+---+------------+
|   Total            |   |                 |   | 2,995,000 |   |            |
+--------------------+---+-----------------+---+-----------+---+------------+

(1) Effective January, 2011, the capacity of plants have been re-rated
    to reflect the de-bottlenecking projects taken-up by the various
    plants from time-to-time.

(2) We own a 99.96% equity interest in TPT Petrochemicals

(3) Joint ventures investment 50/50 equity interest

(4) Joint Venture investment is 43% euity interest with IVL

    PTA Sales and Marketing

Our main customers for PTA are PET resin and polyester producers. A
significant proportion of our PTA production is used by our downstream
PET and polyester production facilities. We sell the remaining PTA that
we do not use within the group to third party customers. In 2011 and
2012, we sold 49.4% and 58.3%, respectively, of our PTA production
volume to the group and 50.6% and 41.7%, respectively, of our PTA
production volume to third party customers.

We sell our PTA either directly to our customers or through trading
companies. We sell some of our PTA through trading companies principally
because either the trading company provides the end customer with trade
finance or because the trading company is purchasing for its own
account. We bear the cost of the trading companies’ commissions by
reflecting it in the PTA price that we charge the customers. Although we
conduct a portion of our sales through trading companies, we know the
identities of the end customers.

Our PTA sales and marketing head office is located in Thailand and is
responsible for sales and marketing activities relating to our customers
worldwide. Our marketing activities include regular meetings with our
customers to understand their requirements and maintain good
relationships as well as providing customer service.

Oxide & Glycol Sales and Marketing

With IVL’s acquisition of its first EO/EG plant in April 2012 has 100%
of its sales in the US. Sales and Marketing is overseen by the sales and
marketing head office in Thailand and implemented by the US sales team.
Sales of our products are broken into two main categories:

Purified Ethylene Oxide (PEO) – sold exclusively on a direct basis into
the US merchant market . The product is used as a chemical intermediate
in the manufacturing of PEO derivatives such ethanolamines, polyols,
ethers and surfactants which are used in the manufacture agricultural
chemicals, rigid and flexible foams , cleaning solvents and the personal
care and beauty care industries respectively.  

There currently 43 pure merchant consumers of PEO in the US and IVOG
supplies 12 of these companies at which IVOG is 100% of requirements
supplier of 4 of these customers, a testimonial to our reliability and
service excellence. IVOG has an approximate 30% of the US merchant
market share of PEO sales.

In addition to PEO, the plant manufactures the glycol products,
Monoethylene Glycol ( MEG), Diethylene Glycol ( DEG) and Triethylene
Glycol (TEG) through a distillation process. The majority of the yield
is MEG.

-   IVLs’ acquisition of the Clear Lake, TX plant was accompanied with a
    supply MEG agreement with the former owner who consumes MEG for the
    engine coolant market principally in the US.

-   IVL’s US Polyester and PET plants consume MEG as a raw material for
    their products. IVL’s US plants have consumptive MEG capacity in
    excess of the Clear Lake, Tx plants production capabilities,
    allowing IVL the option to merchant MEG in the US and global markets
    or consume the MEG on a captive basis.

In 2012, we sold 0.8% of our EO/EG production volume to the group and
99.2% of our EO/EG production volume to third party customers.

PTA Competition

As PTA is a commodity product, competition is based mainly on price and,
to a lesser extent, on product quality and lead times to product
delivery.

Manufacturers of PTA can be classified between merchant producers and
integrated PTA producers. Merchant producers manufacture and supply PTA
to third parties, whereas integrated PTA producers manufacture PTA for
their own captive consumption. We are an integrated PTA producer.

In 2011, there were only two producers of PTA in Thailand, namely Siam
Mitsui and ourselves. We believe that Siam Mitsui, which is a merchant
producer, has an installed capacity of approximately 1,500,000 tonnes
per annum. In international export markets we also compete with PTA
merchant producers located in Asia, Europe and the United States,
including BP, CAPCO, Zhejiang Hualian Sunshine, Mitsubishi Chemical
Corporation, Samsung Petrochemical, Sinopec Yizheng Chemical Fibre Co.
Ltd., Mitsui Chemicals, Sam Nam Petrochemical and Dragon Group. We do
not sell the PTA that we produce in Europe to third parties but consume
such PTA within our group.

Although PTA technology is available through commercial license, we
believe the capital investment required to achieve profitability through
economies of scale may inhibit new entrants to the market.

We believe there is no economically viable competing or substitute
material to PTA that can be used in the polyester chain. DMT is at a
significant disadvantage as compared to PTA due to the greater costs
incurred when using DMT as a raw material.

Oxide & Glycol Competition

PEO Competition – Due to the hazardous nature of PEO, there are no
imports or exports of PEO as a product unto itself. PEO derivatives are
open to import / export. IVOG competes in the US PEO with global
competitors, all of which primarily produce PEO to support internal
production of PEO derivatives and sell the balance of their capacity to
the merchant market. Unlike all of our competitors, IVOG does not
produce any PEO derivatives, which competes with our merchant customers
businesses.

Glycols Competition – The global market for MEG is highly competitive,
involving a large number of producers located throughout the world. MEG
is easy to manufacture, transport and is fungibly stored. The US Shale
Gas revolution has given the US producers advantaged ethylene as a feed
stock material ensuring the US as a low cost region of MEG production.
IVL’s integration into MEG adds value to US PET and Polyester margin
chain. The largest competitors in North America include Shell Chemical,
MEGlobal, Equistar and Sabic, along with PEMEX in Mexico. The US is a
largely mature consumer of MEG with demand growth driven by new PET
capacity and an opportunisitic export arbitrage platform based on the
advantaged NA ethylene costs associated with the shale gas evolution.
    

Subsidiary Descriptions

Indorama Holdings Ltd.

Indorama Holdings Ltd. manufactures wool tops for captive consumption to
be used for worsted yarn spinning. Both top making and spinning facility
is located at the same site in Lopburi, Thailand, as Petform and
Indorama Polymers/AsiaPet. This enables a smooth and cost efficient
production process. Indorama Holdings produces a broad range of yarns
(over 500 types) yarn count ranging from 10 Nm to 125 Nm, used in
various sectors such as woven, non woven, active apparels, technical
textiles and interior textiles. All yarns are produced using 100% Full
Fleece Merino Wool from Australia.

As the Lopburi site was affected by flooding from September 2011, the
site was forced to shut down and will reopen in 2012 following
refurbishments.

Indorama Holdings Ltd. manufactures wool tops for captive consumption to
be used for worsted yarn spinning. Both top making and spinning facility
are located in Lopburi, Thailand. This enables a smooth and cost
efficient production process. Indorama Holdings produces a broad range
of yarns (over 500 types) yarn count ranging from 10 Nm to 125 Nm, used
in various sectors such as woven, non woven, active apparels, Knitwear,
technical textiles and interior textiles. All yarns are produced using
100% Full Fleece Merino Wool from Australia.

After the floods in September 2011, the spinning plant has been fully
reinstalled and now is operational. The top making plant will start in
March , 2013

IRP/AsiaPet

The IRP/AsiaPet PET facility is located in Lopburi, two hours North of
Bangkok. The plant began production in 1995 and marked IVL’s first step
into the PET business. With various expansion projects, the plant’s
initial annual capacity of 20,000 tonnes has now increased to 178,000
tonnes. The facility enjoys virtual backward integration with IVL’s PTA
within the region and partial forward integration with the co-located
Petform packaging facility.

The site was affected by the heavy flooding in Lopburi at the end of
2011 but was back in operation by May 2012.

Petform

The Petform packaging facility is headquartered in Lopburi, Thailand,
and produces PET preforms, PET bottles and HDPE closures for carbonated
soft drinks, water and other applications. The plant is virtually back
integrated with the IRP/AsiaPet PET facility. In 2012, Petform expanded
with new lines in Nakhon Ratchasima (Korat) and within the IPI complex
in Rayong. The Lopburi plant has an annual capacity of 905 million
preforms, 420 million bottles and 1,548 million closures, while the
Nakhon Ratchasima site produces 180 million bottles and the Rayong site
produces 456 million preforms.

Petform is a joint venture with Serm Suk Public Company Limited. The
Lopburi plant was affected by floods at the end of 2011 but recommenced
production in May 2012.

Indorama Polyester Industries (Nakhon Pathom)

The Indorama Polyester Industries facility is located in Nakhon Pathom,
Thailand. The facility was acquired by Indorama Ventures from Siam
Polyester, becoming the company’s first venture into the Polyester
business. With various expansion projects, the plant’s initial annual
capacity of 40,000 tonnes has now increased to 116,000 tonnes
(re-rated). The facility enjoys virtual back integration with IVL’s PTA
within the country.

The Indorama Polyester Industries facility produces polyester fibers,
yarns, and chips, serving customers in the main end-use markets of
apparels, home textiles and technical textiles, with an extensive range
of products for all sectors.

Sustainability initiatives:

Establishing a PET recycling facility for production of flakes, resins
and fibers by recycling used bottles. Civil construction is ongoing.

StarPet

The first plant ever acquired by IVL overseas, the StarPet PET facility
is located in Asheboro, North Carolina, U.S.A. After many expansion
projects, the plant’s initial annual capacity of 50,000 tonnes has now
increased to 252,000 tonnes. Products include PET polymers for PET
bottles, sheets, and other applications.

Orion Global PET

The first entry into Europe by IVL, Orion Global PET facility is located
in Klaipeda, Lithuania. The plant started commercial production in 2006
with an annual capacity of 198,000 tonnes and is running in 2011 at
241,000 tonnes, making it the largest single line plant in Europe.
Lithuania was chosen as home to this project due to an educated
workforce, low energy costs and easy logistics due to its year-round ice
free port.

The first entry into Europe by IVL, Orion Global PET facility is located
in Klaipeda, Lithuania. The plant started commercial production in 2006
with an annual capacity of 198,000 tonnes and has now debottlenecked to
241,000 tonnes, making it the largest single line plant in Europe with
the lowest carbon foot print. Received Best Chemical Company award from
Lithuanian government in 2012.

Indorama Polyester Industries (Rayong)

Another Indorama Polyester Industries Polyester facility is located in
Map Ta Phut, in Rayong Province, adjacent to the National Petrochemical
Complex. The plant is virtually back integrated with the TPT
Petrochemicals’ PTA facility. The facility is also supported by a 55 MW
cogeneration plant located next door and operated by TPT Utilities
Company Limited, a subsidiary of TPT Petrochemicals.

Indorama Polyester Industries produces polyester fibers, yarns, and
chips, serving customers in the main end use markets of apparels, home
textiles, automotive, and non-woven sectors with an extensive range of
products for all sectors. In 2009, one polyester fiber production line
was converted into a PET resin production line. It has a capacity of
290,600 tonnes per year, broken into 91,000 tonnes per annum of PET and
199,600 tonnes per annum of Polyester textiles, non woven and conjugate
fibers, specialty filament yarns and PET Chips. IPI also does batch
Polymerization for PET modified polymers.

There has been significant growth in new product mix, and the company
has been implementing joint projects with customers successfully. The
plant has been upgraded to produce bicomponent staple fiber; a specialty
product made using two different polymers and is primarily used in
hygiene applications like baby diapers and sanitary napkins. This
project is expected to strengthen IVL’s drive to enter into the high end
non-woven customer base.

Indorama Petrochem

The Indorama Petrochem PTA facility is located in Rayong, Thailand and
is a part of the Asia Industrial Estate. The plant’s annual production
capacity is 771,000 tonnes, making it one of the largest single plants
in the world. The Indorama Petrochem PTA facility provides raw materials
to IVL’s PET and Polyester business operations and supplies PTA to
external customers worldwide.

The Indorama Petrochem PTA facility is environment friendly and
generates energy through a heat recovery process.

Indorama Petrochem Limited (IRPL) operates its PTA plant in Asia
Industrial Estate (AIE) located in Rayong Province of Thailand. The
plant has a rerated capacity of 771,000 MT.

Achievements:

Over the last six years since commissioning in Year 2006, IRPL has
optimised the usage of chemicals and utilities consumptions which has
resulted in a cost reduction of roughly 27% (over design consumptions)
without incurring any major capital cost.

This has been possible owing to highly committed and experienced work
force and strong managing systems and processes in place at IRPL.

IRPL is certified for ISO-9001:2008, ISO-14001:2004, OHSAS-18001:2007.

IRH Rotterdam

The IRH Rotterdam PTA facility is located in Rotterdam, in the
Netherlands. It was acquired by Indorama Ventures in 2008 from Eastman
Chemical Company. The IRH Rotterdam PTA facility provides raw materials
to IVL’s PET business operations in Europe. IVL plans to increase the
capacity of this facility following the expansion of the integrated PET
facility.

The facility shares a utility island consisting of a cogeneration (heat
and power) system with the IRP Rotterdam PET facility.

IRP Rotterdam

The IRP Rotterdam PET facility is located in Rotterdam, the Netherlands.
The facility was acquired by Indorama Ventures in 2008 from Eastman
Chemicals Company. The facility had an original annual production
capacity of 200,000 tonnes. Effective 2011, the capacity has been
re-rated to 231,000 tonnes per annum which captures various
debottlenecking projects. A new 187,000 tonne PET line, integrated with
IRH Rotterdam, was added in 2012.

IRP Workington

IRP Workington PET facility is located in the industrial town of
Workington, in the county of Cumbria, North-west England. The facility
was acquired by Indorama Ventures in 2008 from Eastman Chemical Company.
The facility has an annual production capacity of 168,000 tonnes. The
site produces PET resin made with MEG from plant-based ethanol.

The facility is supported by a windmill installed on site, generating 2
MW of energy.

TPT Petrochemicals

The TPT Petrochemicals was the first producer of Purified Terephthalic
Acid (PTA) in Thailand. It has a capacity 613,000 tonnes per year and is
located in Map Ta Phut Industrial Estate, Rayong, Thailand, which is the
6th largest Petroleum and Petrochemicals Complex in the world.  

TPT Petrochemicals PCL was originally founded in November 1991 as Tuntex
Petrochemicals (Thailand) Company Limited. In April 2005, the name was
changed to TPT Petrochemicals Public Company Limited.

The principal feedstock for the production of PTA is Paraxylene,
purchased from PTT Global Chemicals Plc. which delivers from its
aromatics plant located next to the TPT PTA plant. TPT Petrochemicals
owned and operated an on-site co-generation power plant supplying power
to its PTA plant. The co-generation power plant has a production
capacity of 55 MW electricity and high pressure steam which is provides
to the TPT PTA plant, Indorama Polyester Industries Plc and Bangkok
Polyethylene (BPE). The surplus power is sold to the Electricity
Generating Authority of Thailand (EGAT).

AlphaPet

The AlphaPet production facility is located in Decatur, Alabama, U.S.A.
Its first line came on-stream in September 2009 and its second line in
June 2010. It is co-located with the BP Chemicals PX/PTA complex for the
supply of PTA and some utilities. The AlphaPet production facility has a
rated capacity of 432,000 tonnes per year, making it one of the largest
sites in North America. The site produces PET polymers for PET bottles,
sheets and other applications.

The plant employs the new generation Uhde Inventa-Fischer Melt to Resin
(MTR®) technology. The use of MTR technology has a number of advantages
over conventional PET technologies including significant capital and
operational savings, reduced energy consumption and a smaller
environmental footprint.

In 2011, a new recycling plant built onsite  came into operation to
serve major customers with post-consumer recycled PET. Recycle plant
uses FTR® Technology.

Ottana Polimeri S.R.L.

Indorama Ventures acquired the Italian PET and PTA producer Ottana
Polimeri S.R.L. from Equipolymers Europe, a joint venture between Dow
Chemical Company and Petroleum Industries Company of Kuwait. The deal
provides IVL access to the Mediterranean region, including markets in
Southern Europe and North Africa. The acquisition was made through a
50:50 joint venture between IVL’s European subsidiary IVL Belgium N.V.
and PCH Holding S.R.L. (“PCH”) of Italy.

The 184,000 tonnes per annum PTA plant and the co-located 161,000 tonnes
per annum PET plant is situated on the island of Sardinia, Italy,
offering the company the strategic ability to serve Southern Europe with
the shortest transportation route possible.

Guangdong IVL PET Polymer Co., Ltd

Guangdong IVL PET Polymer Co., Ltd. is the first investment of IVL in
China and allows the Company to establish its footprint in one of the
largest and fastest growing markets for PET and Polyester fibers and
yarns. The plant is located on the riverside in Kaiping City, Guangdong
Province, China. It has an original capacity of 406,000 tonnes per
annum. In 2012, the plant completed its debottlenecking project, thereby
increasing the installed capacity to 522,000 tonnes per annum.

The plant has a wide array of products, including PET Polymers and PET
chips for Polyester films, Polyester Filaments and Industrial Yarn. The
main focus will be the domestic market and will also be used as an
export base to the Far East and other markets.

PT Indorama Ventures Indonesia (IVI)

Located in Tangerang, Indonesia, the plant was acquired from SK
Chemicals of South Korea. The plant employs a well proven technology
from Hitachi, Japan. It has a capacity of 88,000 tonnes per year of PET
Chips and 73,600 tonnes per annum of Polyester Filament Yarns. This
plant makes a unique polyester bi-component filament yarn which no
competitor has been able to match and IVL is investing in further
capacity as the demand is very good for this product.

Indorama Polyester Industries Indonesia (IPII)

Established in 1997, the facility is located in Karawang, Indonesia. It
was acquired by Indorama Ventures in March 2011 as part of the same deal
with SK Chemicals that included IVI. It has an annual capacity of 36,000
tons of Polyester Filament Yarns, which are now focusing on the
development of various high function and low denier products. 

Indorama Polymer SP. Z o.o.

The site was founded in Wloclawek, Poland in June 2002 and started
operation in May 2005. It was a part of the acquisition from SK
Chemicals that included assets in Indonesia. The facility has a capacity
to produce 153,000 tons of PET annually.

Due to the location of a third party PTA facility nearby together with
other major feed stock such as MEG and DEG locally available, the site
is virtually integrated providing logistic advantage.  Since its
acquisition unit started growing dynamically, increased its  production
capacity by debottlenecking, process which is continuously going on,
expanded new markets, added reheat product to its portfolio against only
one normal grade produced before acquisition, improved safety standards
with zero accidents in the year and continuously carrying out cost
rationalization.

It is the only plant in the group that uses a real-time process data
gathering and storage system for remotely monitoring the entire process
from any place and at any time in the world. It actively participates in
local charities fulfilling Corporate social responsibilities. The utmost
effort is given to environmental compliance to ensure a smaller carbon
foot print.

Auriga Polymers Inc.

IVL acquired the North American polymers assets of INVISTA in 2011. 
Auriga Polymers’ operations are in Spartanburg, South Carolina, with the
business unit and administrative offices in nearby Charlotte, North
Carolina. The plant once belonged to Hoechst AG of Frankfurt, which also
once owned Trevira in Germany.

The South Carolina facility produces polyester resins and polyester
staple fibers, with a total Polyester fibers capacity of 71,000 tonnes
per annum. Auriga produces fibers for several unique and innovative
non-woven products such as fibers used in Cured-in-Place Piping (CIPP),
which is utilized in repairing damaged sewage lines; and textile fibers
used for military uniforms and material used for filtration
applications, such as in respirator masks. The company supplies
materials to customers with recognized brands in the non-woven industry
segment. 

The facility also produces polyester resins and specialty polymers
currently used in bottles, trays, sheets, film and textile
applications.  Bottles made from Auriga’s resins are used for carbonated
soft drinks, water, beer, juice, wine and food. Auriga owns the
technology for the Crystal Clear Oxygen Barrier Resin, OxyClear®. 
Another benefit of acquiring Auriga Polymers included the enhancement of
research and development (R & D) capabilities.  An advantage from the R
& D integration with IVL’s existing facilities, including AlphaPet and
StarPet is increased production flexibility. Auriga has 387,000 tonnes
of PET capacity.

Indorama Ventures Polymers Mexico

Another part of the North American acquisition from INVISTA was the
Querétaro complex, which was the first filament polyester manufacturing
facility for the textile industry in Mexico. Operations are located in
Querétaro Mexico with a business office in Santa Fe, Mexico City.

Staple fiber production began in 1981; its products are used for the
manufacturing of apparel, bed sheets, bedspreads, comforters, carpeting,
rugs etc. Using the most advanced technology in the world, the PET
bottle grade resin plant started operations in 1994. This resin offers
customers a wide range of benefits, which include crystalline
transparency, light weight, impact resistance, good retention properties
and 100% recyclability. Indorama Ventures Polymers Mexico has a total
capacity of 478,000 tonnes per annum.

Trevira GmbH Germany

Trevira GmbH Germany was acquired under a joint venture with Sinterama,
an Italian company with experience in specialist fibers and a global
footprint. IVL holds 75% of the shareholding in Trevira. The company was
originally the fiber business of Hoechst, one of Germany’s foremost
chemical companies and became an important European manufacturer of high
quality branded polyester fibers and filament yarns for the home
textiles, apparel and automotive industries, the hygiene sector and
technical applications. Its head office is in Bobingen near Augsburg.
The company is the only European producer offering both staple fibers
and filament yarns and is the only fully integrated polyester fiber
company in Europe. It has a total capacity of 120,000 tonnes per annum.

Following a statement by Trevira in November 2011 of its plans to
centralize filament yarn spinning in Guben, it decided that by the end
of 2012 spinning capacity based at its Polish plant in Zielona Góra
would to be moved to its Guben plant, together with the filament
capacity in Bobingen (Bavaria).

The concentration of all units of filament yarn production in Guben
means the company will be operating only the one production site for
each of its two product lines – filaments and fibers. The aim is to make
the production structure slimmer and more efficient.

Trevira can provide services throughout the entire textile value chain,
which offers significant added value for its customers. Trevira is
internationally certified with ISO 9001 and ISO 14001.

PT Indorama Petrochemicals

PT Indorama Petrochemicals, formerly called Polyprima, is a PTA producer
located in Cilegon, West Java, Indonesia, and has an installed capacity
of 465,000 tonnes per annum. Currently IVL holds 43% in this site along
with other Joint Venture partner. Effective 2012, the capacity has been
re-rated to 500,000 tonnes per annum from de-bottlenecking project.

Indonesia is growing to become one of the large polyester markets and
has a shortage of PTA supply. IVL, through its equity stake in PT
Polyprima, will secure the PTA supplies for its Polyester plants in
Indonesia.

Wellman International

Wellman International is both the leading producer of rPET fiber
products and the largest PET recycler in Europe. A subsidiary of
Indorama Ventures, it has three facilities, a fibre manufacturing plant
in Ireland and two flake processing facilities in The Netherlands and in
France, which both service the fiber plant and carry a flake sales
portfolio.

Wellman International

Fibre Production - Ireland

Wellman International Ireland, is Europe's leading producer of high
quality polyester staple fibers, manufacturing high quality polyester
fiber products from recycled post-consumer PET bottles. The rPET fibre
production facility, based in Co. Cavan, Ireland, has an annual fiber
production capacity of 83,000, 22,000 tonnes of which is for bicomponent
fibers . Each year 2.2 billion post-consumer PET bottles are recycled to
make the Wellman fiber portfolio of products at this facility, with the
capability of converting other waste polyester products into 100%
recycled fiber. The company is also the largest European PET recycler,
with two flake processing facilities in The Netherlands and France which
have a combined flake capacity of 70,000 tonnes, which service the fiber
production in Ireland.

Wellman International lead the industry in the development of new fiber
technologies, offering premium products, which consistently deliver
efficient throughputs to the market. The company has 40 years of
expertise across a diverse range of markets, including hygiene and
personal care, home furnishings, automotive and geotextiles. With a
dedicated research and development function driving innovation,
guaranteed service provision and comprehensive technical support are
central to the Wellman International ethos . For more information,
please visit www.wellman-intl.com

Wellman International

Wellman Recycling (France and Holland)

Wellman International is Europe’s largest PET recycler, with two flake
processing facilities, one in Spijk, the Netherlands and the second in
Verdun, France. The bottle recovery plant in Spijk, is located on the
Rhine and was established in 1990. It has an annual flake capacity of
43,000 tonne. The bottle recovery plant in Verdun is located in North
East France and was established in 1995. It has an annual flake capacity
of 27,000 tonnes.

As Europe’s largest PET recycler, Wellman International has a broad
European bottle sourcing network, facilitating maximum supply chain
efficiencies. Both the flake production facilities in Spijk and in
Verdun serve the fiber production plant in Ireland, which produces a
diverse and extensive range of polyester staple fiber products from rPET
flake and is the leading producer of PSF in Europe. Wellman
International Spijk also carries a flake sales portfolio.

FiberVisions

FiberVisions is the world’s largest producer of specialty polyolefin
monocomponent (mono) and bicomponent (bico) staple fibers. Its
facilities are located in key strategic locations in all of the world's
major regions: the USA, Europe and China, giving the Company the ability
to serve IVL’s customers wherever they are located. FiberVisions is also
the global leader in developing, manufacturing and marketing polyolefin
staple fibers for nonwoven applications. FiberVisions uses proprietary
technology and state-of-the-art manufacturing facilities to supply
innovative products to customers in industries such as hygiene,
textiles, automotive and construction. Typical applications of its
products include diapers, wipes, feminine care, filtration,
geosynthetics, building and construction, automotive, apparel and
textiles and paper. The company also offers technical solutions to
customers.

FiberVisions is the technology leader for bicomponent fibers and
specialty and differentiated monocomponent fibers with core competence
in nonwoven fabrics and the ability to leverage technologies across a
range of products and market segments. It has global research and
development capabilities and global manufacturing, sales, and customer
support.

FiberVisions business segments and sales effort are focused on serving
specific end users. With facilities strategically located in close
proximity to many customers and markets, it has developed deep customer
relationships via its global customer base and is able to offer the
flexibility required to make customized products matching customer
needs.

The Covington site is in Georgia, USA, and has a capacity of 76,000 tpa.
The site manufactures monocomponent and bicomponent staple fibers and
has ISO 9001 certification. The products serve markets for hygiene,
industrial and textile products.

The Athens, Georgia, site produces monocomponent and bicomponent staple
fibers and serves customers in the hygiene, industrial and textile
sectors. It has a capacity of 41,000 tpa. The facility is certified ISO
9001, ISO 14001 and DS/EN 16001 (Energy Management Certification)
compliant.

Located in Varde, Denmark, this FiberVisions facility makes
monocomponent and bicomponent staple fibers serving customers in the
hygiene and industrial sectors. It has a capacity of 90,000 tpa. It is
certified for ISO 9001, ISO 14001, and DS/EN 16001 (Energy Management
Certification).

The site at Suzhou, China, produces monocomponent short spin staple
fiber and Carded Thermal Bond nonwoven fabric and has ISO9001
certification.  In 2011, FiberVisions implemented equipment and
technology which enabled the facility to also produce Through Air bonded
nonwoven fabric.   It has a capacity of 14,000 tpa.

Beverage Plastics Limited

Established at Craigavon, Northern Ireland, in the UK, Beverage Plastics
produces each year 587 million Preforms, 178 million bottles and 915
million Closures. IVL acquired a 51% stake and intends to use the
facility to serve its customers in the UK.

Polypet

Located in Cilegon, West Java, PT Polypet Karyapersada is located
adjacent to IVL’s joint venture PTA asset, PT Indorama Petrochemicals
(formerly known as PT Polyprima Karyareksa) and is therefore able to
receive its PTA feedstock via pipeline.  Polypet will provide IVL the
opportunity to further consolidate its foothold in the expanding
Indonesian PET market.

It has 100,800 tonnes of annual capacity.

Indorama Ventures (Oxide and Glycols)

IVL made its first entry into the Ethylene Oxide (EO) business producing
Purified Ethylene Oxide (PEO) and Glycols (MEG, DEG, and TEG) when it
acquired Old World Industries I, Ltd at Clear Lake, near Houston in
Texas, USA, in April 2012. The business has been renamed to Indorama
Ventures (Oxide & Glycols) LLC ( IVOG).

EO is a colorless gas which is used primarily in the production of
ethylene glycols.  Very reactive, it is one of the most versatile
chemical intermediates and is used in the manufacture of surfactants,
polyether polyols, ethanolamines and glycol ethers.  These derivatives
are used to manufacture various products such as soaps, detergents,
brake fluids, weed killer and urethane foam for home and auto. 

MEG is widely used for polyester polymers’ production. However, in North
America and Europe, MEG is also used in the antifreeze/industry. DEG and
TEG are typically used in industry.

IVOG’s Clear Lake facility has several unique advantages:

-   Large capacity (largest reactors in North America) with resultant
    economies of scale and low fixed costs

-   Excellent safety and environmental record

-   CO2 in the recycle loop is among the lowest of any plant in the
    world giving the unit the ability to operate with the latest
    generation high selectivity catalyst

-   The single EO purification tower produces very high EO quality with
    low aldehyde content of less than 10 ppm

The Company’s strategy is to further its raw materials integration and
strengthen the business model for long-term sustainability. By
maximizing crude EO capacity of 435,000 tonnes per annum, IVOG has a
total PEO and EG capacity of 550,000 tonnes per annum on an equivalent
Glycols basis and is in close proximity to raw material sources and
pipelines. The acquisition makes IVL the only global producer of
polyester with integration of both PTA and MEG. IVOG has contracted
customers for both PEO and Glycols with flexibility to shift production
and sales to the highest return on crude EO. The acquisition adds value
to IVL by capturing margins that are healthy and growing while allowing
the Company to hedge its use of MEG with an option of consuming the MEG
production as a feedstock for US PET operations.

Indorama PET (Nigeria) Limited

This is the Company’s first PET investment in Africa and a foothold in
the estimated 450,000 tonnes PET market for West Africa. For IVL, this
is a small entry into a potentially huge growth market. Nigeria itself
is one of the most developed of the African markets and the facility is
situated in a large and secure petrochemical facility.

Currently, many of IVL’s largest customers are making progress in sales
within Nigeria and West Africa. IVL believes that its ability to serve
them from the inside will bear fruit as this market grows for them.

This PET facility in Port Harcourt, Nigeria, produces bottle grade PET
chips through Solid State Polymerization, the second stage of the PET
production process after the initial chips formed by a polycondensation
process. The chips are sourced from the company's facilities in Asia or
Europe and shipped to Nigeria for final processing.

Raw Materials and Suppliers

The two principal raw materials used in the production of the polyester
value chain are PX and MEG. We also buy Ethylene to produce MEG in USA.
Other additives and utilities that we require in our business include
acetic acid, isopthalic acid, various catalysts and various gases.

PTA

We have vertically integrated a portion of our PET business and
Polyester fibers and yarns to our PTA business to provide reliable and
cost effective PTA supplies. Our IRP Rotterdam PET facility and our
Indorama Polyester Industries Polyester fibers and yarns line and PET
resin line are co-located with our IRH Rotterdam PTA facility and TPT
Petrochemicals PTA facility, respectively, while our AlphaPet PET
facility is co-located with the PTA production facility of BP with whom
we have a long-term offtake agreements to purchase PTA. Our IRP
Workington PET facility and Orion Global PET facility obtains some of
its PTA from our IRH Rotterdam PTA facility. Our Asia Pet/Indorama
Polymers PET plant in Lopburi, Thailand and Indorama Polyester
Industries, Nakhon Pathom facility, Thailand source PTA from Indorama
Petrochem and TPT Petrochem plants in Thailand.

MEG

We purchase MEG, a downstream derivative of ethylene, from large global
producers through short and medium term contracts at a price linked to
benchmark published prices. In order to obtain the best prices for the
MEG that we purchase, we source for, and negotiate the prices of, these
raw materials through an informal arrangement with the S.P. Lohia Group
(which is controlled by our Chairman and his immediate family) and the
O.P. Lohia Group (which is controlled by the brother of both our
Chairman and our Chief Executive Officer). However, purchase contracts
are entered into by the relevant subsidiary company according to such
subsidiary’s volume and specification requirements. Our group, the S.P.
Lohia Group and the O.P. Lohia Group combined are the largest, and our
group is the second largest, purchasers of MEG worldwide. By being a
global producer of polyester polymers, we are able to procure MEG on a
pan-global basis.

Paraxylene

We are amongst the world’s largest buyers of PX. We purchase our PX
under long term contracts with PTT Aromatics and Refinery Public Company
Limited, PTT Public Company Limited, Thai Paraxylene Company Limited and
Exxon Chemical Thailand Limited, typically through long-term contracts.
Our Thai PTA plants are able to take delivery of PX either from Thai or
international suppliers via their own Map Ta Phut pipeline which runs
directly from the Thai Tank Terminal (our raw material storage services)
to their tank yard. In Rotterdam, Netherlands, Europe our PTA facility
has its own jetty and Paraxylene is piped into through barges.

Ethylene

We are the fourth largest non-integrated buyer of Ethylene in the US. We
purchase Ethylene from various supplies in USA like; Exxon,
ChevronPhillips Chemical, Ineos etc tied into the Company’s header and
with access other Ethylene pipelines.

Others

Other consummables that we use include acetic acid, IPA, various
catalysts, nitrogen and hydrogen. We purchase these consummables from
various suppliers typically under short-term contracts of one year.

Environmental, Regulatory and Health and Safety Matters

Environmental Matters

Our production facilities generate primarily liquid waste and gaseous
emissions, and small amounts of solid sludge waste and polymer chunks.
Our operations and activities require several permits and approvals, all
of which have either been obtained or are in the process of being
obtained.

We have wastewater treatment units designed specifically for use in our
plants that treat wastewater in several stages to comply with applicable
regulations before the wastewater is discharged in open waterways
leading to the sea. For air emissions, we use filters and a variety of
wet scrubbers, including sodium hydroxide spray scrubbers, rotary
scrubbers, venturi scrubbers and catalytic destruction units to reduce
fine particle and volatile organic compound emissions to within
regulatory standards. Our solid waste consist mainly of sludge and
polymer chunks, which is disposed of through licensed third party
handlers audited on a frequent basis.

Our existing waste management systems allow us to comply in all respects
with existing environmental laws and regulations in Thailand, the United
States, the United Kingdom, the Netherlands and Lithuania.

Indorama Holdings, Indorama Polymers, Orion Global, Indorama Polyester
Industries at Nakhon Pathom, Indorama Petrochem and TPT Petrochemicals
have each been awarded with ISO 14001 Certification for their
environmental management system.

The Rotterdam facilities follow the Dutch chemical association
Responsible Care Program.

The business operations of the Company and its subsidiaries in each of
the jurisdictions in which it operates have been, in 2009, 2010, and
2011 and are in compliance with applicable environmental laws in all
material respects. Neither the Company nor any of its subsidiaries in
Thailand, United State, United Kingdom, Netherlands, or Lithuania is
subject to any allegations or involved in any disputes with governmental
authorities in relation to environmental laws except lawsuit regarding
the improvement of project to increase production efficiency and improve
the air pollution treatment system of Indorama Petrochem PTA Facility,
which was filed a lawsuit in the Thai Central Administrative Court. The
said lawsuit was cleared in year 2010 and the court released Indorama
Petrochem from the lawsuit.

Environmental Regulation

We are required to comply with, and are subject to liability under,
environmental laws and regulations in Thailand, the United States, the
United Kingdom, the Netherlands and Lithuania. Environmental laws and
regulations relating to air emissions and water discharges from
production facilities affect all aspects of our business.

The details and applicability of environmental laws or regulation varies
among our business segments and the geographic locations of our
production facilities. These include regulation relating to waste
disposal, emission levels, waste discharges, wastewater treatment and
noise levels resulting from our operations. We carry out periodic
analysis and third party inspections of each plant. Compliance with
relevant laws and regulation is the responsibility of the respective
managers of the operating companies, who are directly responsible to our
senior management.

Thailand

The 2007 Thai Constitution also contains specific definitions and
provisions relating to the government’s responsibility and citizen’s
rights in the management and development of natural resources and the
environment. It also prohibits projects which may seriously affect the
community with respect to the quality of the environment, natural
resources and health, unless, prior to the operation thereof, their
impacts on the quality of the environment and on public health have been
studied and assessed and a public hearing process has been conducted for
consulting the public as well as interested persons and the opinions of
an independent organization, consisting of representatives, have been
obtained. On December 29, 2009, the Ministry of Natural Resources and
Environment of Thailand issued a notification regarding the criteria,
procedures, code of practice and guidelines for preparation of
environmental impact assessment reports (the “EIA Report”) for projects
or activities which may cause a serious impact on the community with
regard to the quality of environment, natural resources and public
health. The notification provides guidelines for the preparation of the
EIA Report, which includes an assessment of public health as well as a
holding of a public hearing and a hearing of opinions from independent
environmental organizations. However, it is unclear which independent
organizations will provide such opinions on such projects. The
government is in the process of considering promulgating laws with
regards to independent organizations and amending the regulation issued
under the Constitution with respect to the types of projects that may
cause a serious impact on the community.

The primary bodies of the Government of Thailand, which supervise our
operations, are the Office of Natural Resources and Environmental Policy
and Planning (“ONEP”) and the Pollution Control Department, both under
the control of the Ministry of Natural Resources and Environment. We are
required by Thai environmental laws to obtain an approval from ONEP and
to conduct environmental impact assessments of potential facilities
(including any expansion of current facilities) prior to construction or
installation. In addition, we are required to assess the likely effect
our activities have on the surrounding environment, ensure that we
operate our facilities with minimal impact on the environment and the
local population, maintain the emissions of our facilities within
certain limits and submit monthly and quarterly reports to the
Industrial Estate Authority of Thailand and ONEP relating to the above.

United States of America

In the United States, we are subject to extensive federal, state, local
laws, regulations, rules and ordinances relating to pollution,
protection of the environment and the generation, storage, handling,
transportation, treatment, disposal and remediation of hazardous
substances and waste materials. U.S. environmental regulations relevant
to us include the Clean Air Act, Clean Water Act, Resource Conservation
and Recovery Act and Federal Comprehensive Environmental Response,
Compensation and Liability Act. The primary body of the U.S. government
that supervises our operations is the U.S. Environmental Protection
Agency.

United Kingdom

The United Kingdom environmental regulations relevant to us include the
Pollution Prevention and Control Act 1999 and the regulations
promulgated thereunder. We are required to obtain an integrated
environmental permit issued by the United Kingdom Environment Agency
under the Pollution Prevention and Control (England and Wales)
Regulations 2000 for our IRP Workington PET facility. We obtained our
integrated environmental permit on December 19, 2006. The integrated
environmental permit is issued under a regulatory system that employs an
integrated approach to control the environmental impacts of certain
industrial activities through a single permitting process, and
implements the EU Integrated Pollution Prevention and Control Directive
in the United Kingdom.

Our permit includes conditions related to management, operations,
emissions and reporting/recordkeeping and specifically sets emission
limit values for certain regulated sources. The permit also included six
improvement programmed requirements that we were required to implement,
including the requirement to carry out an assessment of the techniques
available to reduce NOx emissions. Five of the six requirements have
been met and a submission on the NOx emissions is currently being
considered by the UK Environment Agency.

The Netherlands

In the Netherlands, we are subject to the Environmental Management Act
(Wet milieubeheer) and are required to obtain an Environmental Permit
that regulates aspects such as air and noise emission, discharge of
wastewater, solid waste disposal, use and storage of hazardous
substances, process safety, odor nuisance and the prevention of soil and
groundwater pollution. The original permit was issued on July 15, 1996,
together with a wastewater permit and subsequent permits were issued to
cover expansion at the IRP Rotterdam PET facility and the IRH Rotterdam
PTA facility.

Following the promulgation of the EU Integrated Pollution Prevention and
Control Directive, the DCMR Environmental Protection Agency (the
regional environmental agency) confirmed that a revised Integrated
Pollution Prevention and Control permit was required for the Rotterdam
facilities covering both the PET and PTA facilities, which we received
in 2008. We are required, as part of the permit conditions, to submit
annual environmental reports for formal approval by competent
authorities.

We expect air emissions legislation to be tightened in the future on
NOx, small particles and volatile organic compounds, which may result in
further capital expenditures being required to upgrade the catalytic
destruction of volatile organic compounds, replacement of burners to
reduce NOx and scrubbers to reduce fine particles.

Lithuania

Under the Lithuanian Republic environmental regulations, we cannot begin
any processing activities without obtaining the Integrated Pollution
Prevention and Control permit, the main law which was implemented
regarding the EU Integrated Pollution Prevention and Control Directive.
We received the Integrated Pollution Prevention and Control permit on
March 29, 2007, which was updated on September 18, 2007, for producing
600 tonnes per day. In March 2009, the Environmental Protection
Department of the Klaipeda region approved an increase to our plant
capacity from 600 tonnes per day to 700 tonnes per day. The Integrated
Pollution Prevention and Control permit was renewed on April 1, 2009 and
is valid until December 31, 2011. We are required, as part of the permit
conditions, to submit quarterly and annual environmental reports to the
Environmental Protection Department of the Klaipeda region.

Health and Safety

We place significant emphasis on the health and safety of our employees,
and are required to comply with a range of health and safety laws and
regulations. We review our health and safety standards on an ongoing
basis and our operations are subject to government authority inspections
throughout the year. We have a safety, health and environment manual for
our employees. Our employees undergo periodic health check-ups as well
as health and safety training due to legal obligations. Specific health
and safety standards and practices vary according to operation and
geographic location.

Operational Hazards and Insurance

Our operations are subject to numerous operating risks, including fire,
earth movement, flood, machinery breakdown, public liability, product
liability, employer’s liability and cargo damage. These risks and
hazards could result in damage or destruction to production facilities,
personal injury, environmental damage and business interruption.

In order to protect ourselves against such risks, we maintain business
all-risk insurance against property damage, machinery breakdown,
business interruption, public liability, employer’s liability, cargo
insurance, finished goods, raw material and indirect material stock. Our
coverage is on a replacement basis. Under the terms of some of our debt
agreements, we are required to name the lenders as a beneficiary or loss
payee of some of our insurance policies.

We maintain insurance against many of the risks we face in an amount
that our Directors consider to be adequate. However, some of our
operations are not insured, including cash handling and group travel
because such insurance is either not available or not deemed necessary.

Competitive Strengths

Industry Focus and Leading Market Positions

We are a leading global producer in the polyester value chain within the
broader petrochemical stream. We have maintained a keen focus and
commitment to the industry in which we participate. Since 2003, we have
significantly sharpened our focus in the polyester value chain through
various expansions and acquisitions, the disposal of a non-core chemical
business, and by expanding our business portfolio and geographical
presence. As a result, we have become a leading vertically integrated
global manufacturer of polyester polymers.

[]

We believe that we are one of the few petrochemical companies that focus
on the polyester value chain, compared with other important players who
are organized in large divisions that, in turn, consist of many
different businesses. We believe that the key advantages of being a
focused player are:

-   Better understanding of the key success factors for individual
    businesses;

-   More efficient allocation of capital and human talent;

-   Ability to make quick management and commercial decisions; and

-   Reduction in overheads needed to manage a diverse set of operations
    and addition of more value due to the similarity of the businesses.

    Global Sales and Manufacturing Footprint

We are a global company with 41 manufacturing facilities located in 15
countries, namely Thailand, the United States, Lithuania, the
Netherlands, the United Kingdom, Mexico, Italy, Germany, France, Poland,
the Republic of Ireland, the republic of China, Indonesia and Nigeria,
across 4 continents, namely Asia, North America, Europe, and Africa,
supplying products to customers worldwide. We are the only PET resin
producer with operations in Asia, North America, Europe and Africa. Our
polyester business is located in Asia and has a globally diversified
customer base. Our PTA is manufactured in Thailand and Europe to provide
the support to our downstream operations as well as to market to
external customers worldwide.

We believe that our global presence enables us to:

-   Capture volume growth;

-   Widen our customer base;

-   Increase our cost competitiveness by being closer to our customers
    and suppliers;

-   Lower our logistical costs;

-   Benefit from averting existing trade barriers; and

-   Reduce the exposure to cyclicality and dependence on any single
    market.

Integrated Business Model

Our polyester value chain business is vertically integrated into MEG,
PTA, PET resin and polyester fiber and yarn. A significant proportion of
our feedstock (PTA+MEG) requirements ( 49.4% in 2011 and 48.1% in 2012)
for our downstream PET and polyester production facilities is sourced
internally.

We believe that the key benefits from integration include:

-   Security of feedstock supply for our PET and polyester operations
    during periods of market fluctuations, specifically in periods of
    high PTA demand;

-   Captive consumption for our PTA operations, resulting in the ability
    to maintain higher capacity utilization as compared to merchant PTA
    suppliers, even in periods of reduced PTA demand;

-   Cost savings through PTA and PET and polyester site co-locations due
    to reduction of logistics costs and the sharing of common services;
    and

-   Cost savings through integration due to reduction of fixed costs
    associated with raw materials procurement, sales and marketing and
    administrative functions.

We believe that integration enhances our operating efficiency,
competitiveness and responsiveness to customers and market developments,
as well as allowing stability in volumes and profits.

Strong Cost Position

We have maintained an emphasis on costs and efficiency and believe that
we hold a strong cost position in the businesses and regions in which we
operate. We believe this is achieved through the following:

Leading economies of scale and flexible operations: We believe we have
some of the largest capacity, and most efficient, production facilities
in the PET resin and PTA industries. We operate the largest single-line
PET resin plant in Europe at our Orion Global PET facility in Lithuania,
which has a capacity of 241,000 tonnes per annum. We also operate the
largest single-line PTA plant in Thailand at our Indorama Petrochem PTA
facility, which has acapacity of 771,000 tonnes per annum. We have
recently constructed a new PET resin plant in North America at our
AlphaPet PET facility in Alabama, U.S.A., with a capacity of 432,000
tonnes per annum. The AlphaPet PET facility is one of the largest in
this region and employs the latest generation PET technology. These
large-scale, modern and efficient facilities enable us to achieve a
competitive cost position in the industries where economies of scale are
critical. In the polyester business, where we focus on the production of
niche products, we have invested in fit-for-purpose, flexible assets
which are ideally suited for the production of niche and value added
products.

Best-in-class manufacturing efficiency: This is achieved through running
our facilities at high capacity utilization rates with optimal levels of
manpower, low overhead costs, as well as energy and utilities cost
savings. We have enhanced our cost competitiveness by building efficient
utility plants using coal or gas as feedstock at most of our facilities
and, where possible, we sell excess electricty and steam to third
parties to reduce our own cost of electricity and steam. We benchmark
all of our facilities against each other in order to optimize
performance.

Raw material cost efficiency: We are able to achieve advantageous raw
material costs due to our large purchasing volumes, proximity to raw
material feedstock and long-term relationships with key suppliers. We
benefit from significant buying leverage for PX, PTA and MEG. We are
amongst the world’s largest buyers of PX and MEG. Our PX requirements
are largely concentrated in Thailand, where we benefit from increased
bargaining power. By being a global producer of polyester polymers, we
have an advantage over regional producers of being able to manage MEG
procurement on a pan-global basis. We are one of the largest merchant
PTA buyers in the U.S. market, which provides enhanced buying leverage.
Our plants are well positioned, mainly through co-location or close
proximity, for advantaged raw material logistics and infrastructure
support.

Low capital cost: We have been able to achieve a low capital cost
structure by constructing large-scale plants and acquiring assets at a
discount to their replacement cost. Our Orion Global and AlphaPet PET
production facilities benefit from a low capital cost per tonne because
of their large scale. We have acquired our Thai PTA and polyester assets
as distressed assets at a discount to their replacement cost. We believe
our acquired European PET and PTA assets were purchased at an attractive
price.

Experienced Management Team with a Proven Track Record of Successfully
Growing and Managing the Business

Our management team is composed of highly experienced managers with
longstanding leadership experience, as well as significant industry
knowledge.

Our management team has a proven track record of successfully
implementing capital-intensive projects to increase our production
capacities, including:

-   Completing the construction of the Orion Global PET facility in
    Lithuania with an installed capacity of 198,000 tonnes per annum in
    2006 and increasing to 241,000 tonnes per annum in 2011;

-   Increasing the installed capacity of the StarPet PET facility in USA
    from 50,000 tonnes per annum in 2003 to 116,000 tonnes per annum in
    2005, to 225,000 tonnes per annum in 2007, and to 252,000 tonnes per
    annum in 2011;

-   Increasing the installed capacity of the Indorama Polymers PET
    facility in Thailand from its initial 21,600 tonnes per annum to
    90,000 tonnes per annum in 2005, to 178,000 tonnes per annum in
    2011;

-   Increasing the installed capacity of the Indorama Polyester
    Industries polyester facility in Nakhon Pathom, Thailand from 40,000
    tonnes per annum to 100,000 tonnes per annum through 2007, to
    108,000 tonnes per annum in 2008, to 116,000 tonnes per annum in
    2012;

-   Conversion of a polyester fibers and yarns line to PET line of
    91,000 (re-rated) tonnes per annum in 2009;

-   Increasing the installed capacity of the Indorama Polyester
    Industries polyester facility in Map-ta-Phut, Thailand from 144,000
    tonnes per annum to 199,600 tonnes per annum in 2012;

-   Completing the construction of the AlphaPET facility in Alabama with
    an installed capacity of 432,000 tonnes per annum in 2009 and added
    capability of recycling to it in 2011;

-   Increasing the installed capacity of GIVL PET facility in Guangdong,
    China from 406,000 tonnes per annum in 2011 to 522,000 tonnes per
    annum in 2012;

as well as selecting attractive acquisition opportunities and
successfully improving the operations and profitability of acquired
businesses, including:

-   The acquisition of the StarPet PET facility In USA in 2003;

-   The acquisition of Eastman Chemical Company’s European operating
    assets, comprising a PET facility in the United Kingdom, a PET
    facility in the Netherlands and a PTA facility in the Netherlands,
    in March 2008;

-   The acquisition of 54.5% of the shares in Indo Poly in 1997 and an
    additional 44.4% of the shares in 2008, and the acquisition of
    98.46% of the shares in Tuntex Thailand in September and December
    2008, subsequently re-named Indorama Polyester Industries;

-   The acquisition of 100.0% of the shares in Indorama Petrochem in
    September 2008;

-   The acquisition of 50.56% of the shares in TPT Petrochemicals
    between August and October 2008, and an additional 4.04% in 2009.
    During 2010, we acquired an additional 45.36% of the shares,
    increasing total shares held in TPT Petrochemicals to 99.96% at the
    end of 2010;

-   The acquisition of 50% equity stake through a joint venture in UAB
    Ottana Polimeri Europe to acquire an integrated PTA/PET plant in
    Ottana, Italy;

-   The acquisition of the Guangdong PET facility in China in January
    2011;

-   The acquisition of the PET resins and Polyester staple facilities
    located in Spartanburg, South Carolina, USA and Queretaro, Mexico.
    from Invista S.a.r.l. in March 2011; and

-   The acquisition of the Polyester Filament yarns and PET resins
    facility in Indonesia and PET resins facility in Poland from SK
    Chemicals in March 2011;

-   The acquisition of 75% equity stake through a joint venture in
    Trevira GmbH a speciality polyester fibers and filament producer in
    Germany and Poland.

-   The acquisition of 43% equity stake in PT Polyprima Karyesreska, a
    PTA producer, in Indonesia.

-   The acquisition in the recycle and fiber manufacturing businesses of
    Wellman International in in the republic of Ireland, the Netherlands
    and France in November 2011

-   The acquisition of 100% equity stake in FiberVisions Holdings LLC, a
    global manufacturer of specialty mono and bi-component fibers based
    in Duluth, Georgia, USA The acquisition of 100% partnership interest
    in Old World Industries I Ltd., and Old World Transportation Ltd.,
    (collectively called "Old World"),located in Clear Lake, Texas, USA.

-   The acquisition of 51% Stake in a Packaging Business. Beacon Trading
    (UK) Limited has acquired 51% stake in Beverage Plastics (Holdings)
    Limited ("BPL") in North Ireland, United Kingdom.

-   The acquisition of 100% stake in PET resin assets of PT Polypet
    Karyapersada. The PET facility is located at Cilegon, Indonesia with
    a production capacity of 100,800 tons per annum.

-   Start up of Solid State Polymerization (SSP) Plant in Nigeria. The
    first PET investment of IVL in Africa.

Our Strategy

Our objective is to be the market leader in the polyester value chain in
terms of scale and integration, profitability and return on investment,
supported by a focus on delivering superior customer satisfaction and on
corporate responsibility, thereby enhancing shareholders’ value.

Our ongoing and future strategy has therefore been designed to help us
continue achieving our objectives as follows:

-   Sustaining and increasing our market positions, through selective
    focused growth and investment;

-   Enhancing our integration;

-   Diversifying our product and customer mix;

-   Adding innovative products for new applications and specialty
    products to expand margins and increase our product offerings to
    cutomers

-   Developing research and development recycling capabilities and
    increasing use of recycled materials;

-   Continuing focus on cost competitiveness; and

-   Maximizing stakeholder value by focusing on financial discipline and
    prudence.

Focused Growth and Investment

Our growth and investment strategy is to build and enhance our existing
market leadership position in each of the regions that we operate, as
well as expand our geographical presence through organic growth and
value-enhancing acquisitions in the petrochemical industry, with a
specific focus on the polyester value chain and industry.

We have an established track record of implementing this strategy
through greenfield investments, brownfield expansions as well as
selecting attractive acquisition opportunities, while at the same time
effectively integrating the acquired businesses within our organization.
We intend to continue increasing our exposure to markets which we
believe provide us with potential opportunities, with a keen emphasis on
the BRIC (Brazil, Russia, India and China) regions as well as the Middle
East and developed nations.

Enhancing our Integration Model

We expect vertical integration, either through asset ownership, co-sites
with owned assets or virtual integration through co-sites with key raw
material suppliers, to enhance our operational and logistical
efficiency, cost competitiveness and raw material security. Integration
through owned assets also enhances our ability to insulate ourselves
from sector cyclicality and improve the quality and predictability of
earnings. Moving forward, our strategy will focus on growing our PTA
capacities in line with our downstream polyester capacities, especially
in markets that we identify to be important.

During 2008, we entered the PTA segment of the polyester chain through
the acquisition of three PTA production facilities, which provide raw
material support for our downstream PET and polyester facilities. We
intend to gradually consume an increasing quantity of PTA internally
through our PET and polyester facilities, reducing quantities available
for merchant sales.

During 2012, we expanded our business into MEG segment, which is one of
the main raw materials for our downstream products, by acquiring EO/EG
facility from Old World Industries, LLC. Starting from 2Q12 onward, we
began looking at IVL business as three segments: PET resins, Polyester &
Wool, and Feedstocks. Feedstock segment comprises the PTA and Oxide &
Glycols businesses.

Diversifying Our Product and Customer Mix

Diversifying our customer mix, both geographically and through end-use
applications (for some business segments), is an important aspect for
our continued success in the polyester value chain. We plan to continue
to enhance our marketing efforts to geographically diversify our
customer base for our PET and PTA product lines. For our PET and
polyester business segments, in addition to continued expansion of
geographic reach, we also look to diversify our customers based on the
end-use application mix. We believe this strategy will help insulate us
from dependence on individual customers and/or an individual application
base, providing us with protection against potential customer distress
or industrial downturns in individual application sectors.

In the polyester business, in addition to maintaining cost and price
competitiveness, we seek to differentiate ourselves through value added
products. This necessitates that we maintain a wide product range to be
a “one-stop shop” for a customer’s requirements and maintain flexibility
in our manufacturing processes to satisfy customer requirements on short
notice.We have significantly expanded our non-commodity or Sepcialty
portfolio.

Developing Research and Development Capabilities and Increasing Use of
Recycled Materials

As a leading polyester value chain player, we intend to focus on the
development of our research and development capabilities, either through
our own facilities or through the establishment of key relationships
with other industry players.

We believe research and development will provide us with opportunities
to better serve our polyester polymer customers by developing products
tailored to serve their requirements and by developing methodologies and
process efficiencies to allow our customers to improve their efficiency.
We believe that increases in our ability to use recycled materials in,
and integration of the use of such recycled materials within, our
standard processes will allow us to cater to changing customer
objectives and proactively address environmental issues. IVL has
announced to invest in recycling projects for both PET and Polyester
fibers and yarns in Thailand and in USA.

Continuing Focus on Cost Competitiveness

Maintaining a low cost philosophy by continued focus on production cost
efficiency, scale and technology efficiency, raw material efficiency and
investment efficiency will help us maintain our industry cost position
in the future. In volume driven commodity businesses, such as our PET,
PTA and some commodity polyester fiber businesses, cost competitiveness
is a key driver which differentiates industry leaders from others.

Financial Discipline and Prudence

We are committed to maintaining a continued emphasis on financial
discipline and prudent investment decisions. We evaluate each potential
investment on the basis of stand-alone profitability and efficiency, in
addition to its potential synergistic contribution within the overall
organization. We strive to maintain an efficient capital structure as we
grow to provide us sufficient flexibility in our operations and
sufficient liquidity in our cash flow position.

We intend to continue to finance projects on a stand-alone basis and to
maintain debt levels at a level where cash flows from individual
operations are sufficient to cover our debt service requirements even
during industrial downturns.

Market and Industry Overview

The information included in this section, including all data (actual,
estimates and forecasts) relating to, amongst others, demand, production
and consumption volumes and import and export volumes, has been provided
by PAL, a leading consultancy in global raw materials and macro
polyester markets, except as otherwise stated. We do not make any
representation as to the accuracy of this information. These sources,
including the data provided by PAL, are based on economic and other
assumptions that may prove to be incorrect and the information has not
been independently verified by us. Prospective investors should
recognize that certain industry data included in this section is
estimated in the absence of official company confirmation, or reliable
country source information and should not place undue reliance on such
data. Data included in this section with respect to a year denoted with
the letter “E” means the data is estimated based on preliminary actual
data and “F” means the data is forecasted, respectively, by PAL based on
its available sources or by the source cited below. Forecasts,
estimates, predictions and other forward-looking statements contained in
this section and throughout the document are inherently uncertain
because of changes in factors underlying their assumptions, or events or
combinations of events that cannot be reasonably foreseen. Actual
results and future events could differ materially from such projections.
Prospective investors should not place undue reliance on such
statements, or on the ability of PAL or any third party to accurately
predict future industry trends or performance.

Polyester Value Chain Overview

Introduction

The polyester value chain consists of polyester polymer and purified
terephthalic acid (“PTA”), the polyester polymer intermediate. The key
raw materials to the polyester value chain are paraxylene (“PX”) and
monoethylene glycol (“MEG”). In 2012E, the global polyester polymer
industry had an estimated demand of 66.1 million tonnes and the global
PTA industry had an estimated demand of 51.0 million tonnes.

Polyester polymers are classified into three primary segments: polyester
fiber, polyethylene terephthalate (“PET”) resin, and film and
specialties. In 2012E, polyester fiber represented 64.8% of the total
demand, followed by PET resin and film and specialties with a 30.2% and
5.0% market share, respectively. Polyester fibers are classified as
either polyester staple fiber or polyester filament yarns and are
primarily used in the apparel, home textiles, medical textiles,
geotextiles, and industrial applications.

PET resin, used primarily in the manufacture of preforms, which are then
converted (blow molded) into bottles, is used in the packaging of
beverages, food, cosmetics, pharmaceuticals and other applications. The
primary markets for film and specialty polyesters are packaging, media,
photography, electronic and other industrial applications.

Given the position of PTA and polyester polymers in the chemicals
industry, these products act as an intermediate step between the basic
petrochemicals and fast moving consumer goods that drive the demand for
polyester fiber, PET resin and film and specialties.

Industry Fundamentals

The key fundamentals that underpin the polyester value chain include:

-   Consistent consumer driven demand. Polyester products have
    compelling attributes such as versatility, convenience,
    affordability, high performance, comfort, and eco-friendliness that
    make polyester increasingly indispensible for use in a broad range
    of everyday applications. Polyester is the material of choice for
    both packaging and fiber applications, with a strong substitution
    effect for competing materials.

As reflected in the chart below, total polyester demand has been growing
consistently and is expected to continue to grow at steady rates. From
2000 to 2012E, global demand for polyester polymer grew at a compound
annual growth rate (“CAGR”) of 7.0%. From 2012E to 2015F, total
polyester demand is expected to expand at a CAGR of 8.0% to 83.4 million
tonnes in 2015F driven by burgeoning demand from the fast growing
emerging markets, especially China and India, the increased substitution
of competing materials such as cotton, aluminium and glass as well as
the increased use of polyester in other end use products.

The following chart illustrates the historical and projected global
demand for polyester polymer for the periods indicated.

[]

Source: PAL October 2012

-   Relatively stable profitability. Polyester industry profitability
    has proven to be not impacted by primary economic indicators such as
    GDP or oil prices. Over a long term period, the polyester industry
    spreads, the difference between the product selling price and the
    cost of raw materials used in the production, have remained rather
    consistent across economic cycles. This is because (i) polyester is
    primarily used in end use products, which are staples and thus
    insulated from the fluctuations in personal income and the general
    state of the economy (ii) polyester demand is not sensitive to price
    changes. Raw materials ultimately only account up to 5% and 4% of
    the total price of the piece of a garment and a bottle of a soft
    drinks beverage paid by the consumer, respectively. Therefore even
    substantial changes in prices can be safely absorbed into the value
    chain without having any real impact on the final consumer.

The following chart illustrates global integrated PTA and PET spreads in
relationship to global GDP and changes in crude oil price for the
periods indicated.

[]

Note: Blended industry spread across three regions, Europe, US, Asia;
per 1 tonne of PET

Source: PAL October 2012, IMF World Economic Outlook Database

-   Market Regionalization. The PTA and the PET businesses are regional
    businesses. Inter-regional trade, whereby product is produced in one
    continent but exported for use in another, is limited as logistics
    and duties serve as import barriers. The cost of production,
    excluding raw materials, is comparable across the regions. Labor
    cost is not a material criterion in the production of PTA and PET
    resin, therefore Asia does not have an advantage. The European Union
    and the United States, the key important PET consuming regions, have
    adopted customs tariffs and, in the case of the European Union,
    anti-dumping duties from various Asian and the Middle Eastern
    countries in order to protect their domestic market. It is important
    to be domestically present in these regions. In terms of market
    consolidation, the North American and the European Union PTA and PET
    resin markets are fairly consolidated, whereas the Asian market is
    relatively fragmented with a large number of producers and
    significant opportunity for consolidation and/or rationalization.

Benefits of Integrating the Polyester Value Chain

The price of PET resin and polyester fiber is predominantly dominated by
market dynamics and, to a lesser extent, by the PET resin and polyester
fiber producer. Therefore, in order to be profitable, producers must
effectively manage their production costs. The integration of PTA
production provides raw material security as well as significant
opportunity for cost reduction. The benefits from integration include
the following:

-   Secured supply of PTA to downstream operations. A key benefit of the
    integration of the PTA and PET resin or polyester fiber operations
    is security of PTA sourcing during periods of market fluctuations,
    specifically in periods of PTA tightness and/or shortage.

-   Captive consumption for PTA operations. This results in the ability
    to maintain higher capacity utilization as compared to merchant PTA
    suppliers, even in periods of reduced PTA demand.

-   Cost savings through site co-locations. The close proximity of the
    PTA and PET resin and polyester fiber plants significantly reduces
    (or, in the case of co-located plants, eliminates) the cost of
    shipping PTA from its production site to the PET resin and polyester
    fiber producer site and saves on fixed costs due to the sharing of
    common services.

-   Cost savings through integration. Integration saves on fixed costs
    associated with raw materials procurement, sales and marketing and
    administrative functions.

Accordingly, integration can result in enhanced operating efficiency,
competitiveness and responsiveness to customers and market developments,
as well as stability in volumes and profits.

PET Resin Industry Overview

Introduction

PET resin is produced from polyester polymer which is a mixture of PTA
and MEG. PET is a plastic resin utilized in a vast array of applications
and is one of the most widely used packaging materials worldwide. From
2000 to 2012E, global PET resin demand grew at a CAGR of 8.6%, from 7.4
million tonnes in 2000 to 20.0 million tonnes in 2012E. This growth has
been driven by increasing consumer spending, population growth,
substitution of PET resin as a primary packaging material and the
increased use of PET resin in other end use products.

PET resin is the packaging material of choice for many food and non-food
products due to its glass-like transparency, ability to retain
carbonation and freshness, chemical inertness, recyclability and a
toughness-to-weight ratio which allows for the manufacture of
lightweight, large-capacity, safe break-resistant containers. PET resin
is used in widespread packaging applications that can be categorized
into the following end use products:

  • Beverage and food:  such as carbonated soft drinks, water, milk, ice
  tea and coffee, health and sport drinks, alcoholic drinks, beer,
  juices, jams and sauces and edible oil;

  • Home care:  such as shampoo, detergents, cosmetics, and cleaning
  solvents;

  • Health care:  such as blister packing for medical supplies and
  pharmaceuticals; and

  • Other industrial uses:  such as signage, transportation and
  construction, roof furniture and sanitary ware.

According to the European Association of Plastics Manufacturers, PET
resin is a recyclable and energy efficient packaging material. PET resin
can be recovered, and the material reused, by simple washing processes
to regenerate clean washed polymer flakes or by chemical treatment to
break down the PET resin into raw materials or intermediates which are
converted into new PET resins. Recycled PET resin can be used to make
many new products, including polyester fiber for carpet, apparel,
luggage, upholstery, fiberfill for sleeping bags and winter coats,
industrial strapping, sheet and film, automotive parts, such as luggage
racks, headliners, fuse boxes, bumpers, grilles and door panels.

According to various studies, the use of PET resin significantly reduces
energy demand and greenhouse emissions as compared to alternative
materials such as aluminum and glass.

[]

Source: Franklin Associates

Global PET Resin Market

The following table summarizes the global PET resin market structure for
2012E.

  ------------- ------------- ------------ ------------ ------------ --------
                                                        Production   Demand

                Production    Demand       Net Trade    Share        Share

                (Million      (Million     (Million     (%)          (%)
                tonnes)       tonnes)      tonnes)                   

  World         19.7          20.0         (0.3)        100%         100%
  ------------- ------------- ------------ ------------ ------------ --------

Source: PAL October 2012

Asia is currently the largest consuming region for PET resin and has the
largest production share. Surplus supply in Asia and North America are
exported to other parts of the world. Other regions are net importers of
PET resin.

PET Resin Demand Dynamics

Key Demand Drivers

Demand for PET resin is predominantly driven by the following factors:

  • the growth in demand for end use products, in which PET resin is
  used as the primary packaging material, such as water and carbonated
  drinks. This growth is predominantly influenced by population growth,
  disposable income and consumer trends;

  • the continued substitution of existing packaging materials such as
  aluminum, glass, tetra pack and other polymers by PET resin due to PET
  resin’s ability to retain carbonation and freshness, chemical
  inertness, recyclability and cost. The end use products where PET
  resin is currently not the primary packaging material include milk,
  other dairy beverages, cosmetics, pharmaceutical and other non-food
  products; and

  • the development and enhancement of PET resin packaging, which
  provides a high oxygen barrier, prevents oxygen seepage and increases
  product shelf-life. The end use products which are susceptible to
  spoilage by oxygen leakage include beer and fruit juices.

Demand for PET resin is characterized by the following attributes:

  • PET resin is primarily used in the packaging of end use products,
  some of which are staples and thus more insulated from the
  fluctuations in personal income and the general state of the economy.

  • There is currently no commercially attractive or practical
  alternative to PET resin in the spectrum of packaging. While there
  could be other polymers which may be substituted for PET resin in
  packaging materials, these other polymers (i) are expensive to
  manufacture, (ii) require raw materials necessary for polymerization
  which are limited and therefore expensive, (iii) are unsafe for food
  products, (iv) are difficult to mass produce or (v) have limited
  production capacity.

Global Demand Growth Outlook

The following chart illustrates the historical and forecasted demand
growth for the global PET resin industry for the periods indicated.

[]

Source: PAL October 2012

As reflected in the chart above, Global PET resin demand has
significantly expanded over the past years and is expected to continue
to grow at steady rates during the periods indicated. From 2012E to
2015F, global PET resin demand is expected to continue at a CAGR of 7.8%
per annum.

Regional Demand Growth Outlook

Demand for PET resin is expected to post positive growth across all
regions from 2012E to 2015F. Asia is expected to continue to drive the
demand for PET resin, with the market expanding at a CAGR of 12.5%
during the forecast period.

North America and the European Union, each an important consuming
region, will also see growth, which although lower in terms of growth
rates, it will still be sizeable in terms of absolute demand increment.

The following table sets forth the demand outlook for the periods
indicated.

  ------- ---- ------------- ---------- ------------ -------- ---------------
               Demand        Market     Demand       Market   CAGR

               2012E         Share      2015F        Share    2012E-2015F

               (Million      (%)        (Million     (%)      (%)
               tonnes)                  tonnes)               

  World        20.0          100%       25.0         100%     7.8%
  ------- ---- ------------- ---------- ------------ -------- ---------------

Source: PAL October 2012

In 2012E, the estimated world average per capita consumption of PET
resin was 2.8 kg. The developed regions of North America and the
European Union have a per capita consumption of 9.0 kg and 6.8 kg,
respectively. In comparison, the developing regions of Central Europe,
South America, Asia and the Middle East & Africa, have lower per capita
consumption of 3.8 kg, 3.4 kg, 1.8 kg and 1.7 kg, respectively.
Therefore, given the large gap of per capita consumption between the
developed and the developing regions, there is scope for growth in the
latter, most notably in Asia.

The following chart illustrates PET resin per capita consumption by
region for 2012E.

[]

Source: PAL October 2012

Substitution of Competing Materials

Over the past decade, PET resin has been increasingly replacing other
packaging materials such as glass, aluminum, and other plastics. The
share of PET resin in the total beverage packaging market has increased
from 22.7% to 33.4% from 2000 to 2010E. In the same period, the share of
main competing materials in the total consumption has decreased, from
32.5% to 25.4% for glass, from 30.7% to 24.2% for aluminum.

The following chart illustrates the position of PET packaging against
other materials from 2000 to 2010E.

[]

Source: Euromonitor, PAL Analysis

Competitive Environment

As PET resin is a commodity product, competition is predominantly based
on price and, to a lesser extent, on other factors including product
quality, continuity of supply and customer service.

In an environment characterized by a high level of price competition,
the leading producers are likely to have the following competitive
advantages:

  • economies of scale;

  • integration into raw materials;

  • low cost manufacturing;

  • domestic presence;

  • efficient logistics;

  • ability to manage raw material procurement on a pan-regional
  basis; and

  • ability to supply and service customers on a global basis.

Generally, efficient producers with a stronger customer base, superior
market reach and greater market penetration are able to achieve higher
capacity utilization than producers without these characteristics.

Global Market

The global PET resin industry is relatively consolidated with the top
ten producers representing 57.9% of the global capacity.

The following table sets forth the global ranking of the leading market
participants in terms of nameplate capacity for 2012E.

  --------- --------------------- ------------------------- ------------ -----------
  Ranking   Company               Geographical Presence     Nameplate    Share (%)
                                                            Capacity     

                                                            ('000 MT)     

  1         IVL                   North                     3,583        14.5%
                                  America/Europe/Asia/ROW                

  2         Alpek                 North America/South       1,850        7.5%
                                  America                                

  3         M&G Group             North and South           1,730        7.0%
                                  America/Europe                         

  4         Jiangsu Sanfanxiang   China                     1,600        6.5%
            Group                                                        

  5         China Resources       China                     1,340        5.4%

            Top 10 Producers                                14,341       57.9%

            Others                                          10,420       42.1%

            Total                                           24,761       100%
  --------- --------------------- ------------------------- ------------ -----------

Note: Ranking based on October, 2012E nameplate capacity

Source: PAL October 2012

As reflected in the table above, out of the top ten producers, IVL is
the only producer with the domestic presence in key PET resin regions,
North America, European Union and Asia.

North America

The North American PET resin market is relatively consolidated with the
top three producers representing 87.5% of the regional capacity. As of
2012E, it is estimated that Alpek S.A. de C.V is the largest producer
with 1,655,000 tonnes of capacity, followed by IVL with 1,555,000
tonnes, M&G Group with 960,000 tonnes. Others are Formosa Group, and
Selenis.

European Union

The European Union PET resin market is also consolidated with the top
four producers representing 68.9% of the regional capacity. For 2012E,
it is estimated that IVL is the largest producer with 1,036,000 tonnes
of capacity, followed closely by La Seda de Barcelona with 454,000
tonnes, Neo Group with 360,000 tonnes and Equipolymers with 340,000
tonnes. Other important producers include Novapet, M&G Group, CEPSA,
Lotte Group, and Plastipak.

Asia

The Asia PET resin market is relatively fragmented with the top five
producers representing 44.2% of the regional capacity. For 2012E, it is
estimated that Jiangsu Sanfangxiang Group will be the largest producer
with 1,600,000 tonnes of capacity, followed by Far Eastern Group with
1,325,000 tonnes, China Resources with 1,340,000 tonnes, IVL with
991,600 tonnes and Hengli with 600,000 tonnes. Other important producers
include Reliance Industries Ltd, and Formosa Group. Due to a large
number of small capacity PET resin producers in Asia, there is a
significant opportunity for consolidation and/or rationalization.

Polyester Fiber Industry Overview

Introduction

Polyester fiber is the most versatile as well as the most widely used
fiber in the world. The global polyester fiber industry in 2012E had an
estimated production of 43.5 million tonnes, representing 55.4 % of the
total fiber production. From 2000 to 2012E, global polyester fiber
demand grew at a CAGR of 7.0%. The growth has been driven by increasing
consumer spending, population growth, substitution of competing fibers,
primarily cotton, in traditional applications, as well as the
development and enhancement of end use products.

Polyester fibers are used in widespread applications that can be
categorized into the following three main end use products:

  • Apparel:  woven and knit apparel and apparel accessories, including
  linings, interlinings, sewing thread, fiberfill and footwear;

  • Home textiles:  sheets, pillow cases, bedspreads, comforters,
  blankets, mattress covers and other bedding, towels, curtains and
  draperies and table linen; and

  • Other industrial products:  industrial hose and belting, luggage,
  back packs and sport bags, medical and sanitary applications, nonwoven
  and narrow fabrics not used in apparel or home textiles, rope and
  cordage, tents and tarps, textile bags; as well as fabrics used in
  furniture, autos, mattresses, umbrellas and filters.

The polyester fiber industry is typically viewed as comprising of two
main product segments: polyester staple fibers and polyester filament
yarns. Polyester staple fibers are bundles of strands cut into short
lengths, which are primarily used in apparel and home textiles and are
often blended with cotton or other natural and synthetic fibers. Another
form of polyester staple fibers, fiberfill, is used as stuffing for toys
and pillows and as insulation and padding for bedding and furniture.
Polyester filament yarns are continuous strands of fiber, which are used
in apparel, home textiles, and industrial end use markets. In 2012E,
66.2% of total global polyester fiber was used in the production of
polyester filament yarns and the remaining 33.8% was used in the
production of polyester staple fibers.

Polyester fiber is classified as either a commodity or non-commodity
polyester fiber, based on the end use application. Commodity polyester
fibers are sold in bulk with little differentiation between suppliers
and generally at lower margins than non-commodity polyester fibers.
Non-commodity polyester fibers are produced in smaller tonnage, are
generally custom made, have a higher unit value, have generally less
price sensitive customers and have a stringent performance criteria. The
production of commodity polyester fibers tends to be dominated by large
producers with economies of scale, whereas the production of
non-commodity fibers tends to be dominated by producers with
fit-for-purpose assets and cost efficient and flexible operations.

Competitive advantage in the commodity polyester fiber segment of the
business is gained through market share, economies of scale, raw
material cost and logistics cost advantages. In the non-commodity
polyester fiber segment, the competitive advantage is achieved through
product differentiation, customized service, industry experience and
operational excellence, such as, reliability, cost and flexibility. See
"Competitive Environment”.

Polyester fiber is produced from a mixture of PTA and MEG to produce
polyester polymer. There are two polyester polymer production processes
which may be used to produce polyester fibers: the batch process and the
continuous process. In the batch process, polymerization yields
polyester chips which are further processed into polyester fiber. In the
continuous process, however, polyester fiber can be extruded directly
from polymerization to direct spinning. For the production of commodity
polyester fiber, the continuous process is favored because it is more
economical for it creates less waste and has a lower energy and labor
costs than batch process technology. For the production of non-commodity
polyester fiber, batch processing is preferred because the producer has
more flexibility to produce different types of polyester fibers with
minimal losses of intermediate products.

Polyester fiber is more environmentally friendly than cotton. According
to various studies, the use of polyester fiber significantly reduces
water consumption and greenhouse emissions as compared to cotton.

[][]

Source: Tampere University of Technology, Finland

Global Polyester Fiber Market

The table below summarizes the global polyester fiber market structure
for 2012E.

  ------------ ------------ ----------- ---------- ------------ ---------------
                                                   Production   Consumer Demand

               Production   Consumer    Net Trade  Share        Share
                            Demand                              

               (Million     (Million    (Million   (%)          (%)
               tonnes)      tonnes)     tonnes)                 

  World        43.5         42.9        0.6        100%         100%
  ------------ ------------ ----------- ---------- ------------ ---------------

Source: PAL October 2012

The global polyester fiber industry is dominated by Asia, in particular
China. Asia is the sole exporter with the European Union and North
America being the largest importers. In addition to Asia, North America
and the European Union are the largest consumer regions.

Polyester Fiber Demand Dynamics

Key Demand Drivers

Demand in the polyester fiber industry is defined as consumer demand
which is actual consumer demand for the end use product where polyester
fiber is the primary fiber.

Demand for polyester fiber is primarily driven by the following factors:

  • the growth in demand for conventional end use products, such as
  apparels, upholstery, home furnishings, floor coverings in which
  polyester fiber is used as the primary material, which is further
  influenced by population growth, disposable income and consumer
  trends;

  • the substitution of existing fibers such as cotton, nylon, acrylic,
  cellulosics by polyester fiber due to its versatility and favorable
  cost-performance characteristics; and

  • the development and enhancement of applications in which polyester
  adds value such as those in the nonwovens industry, including wipes,
  geotextiles, medical, hygiene, paper reinforcement, filters, fillings;
  automotive industry, including airbags, seatbelts, tires; specialty
  apparel applications such as flame-resistant and other protective
  clothing and sports apparels.

Demand for polyester fiber is characterized by the following attributes:

-   Polyester fiber is primarily used as a raw material in the end use
    products, most of which are staples and thus more insulated from the
    fluctuations in personal income and the general state of the
    economy.

-   Polyester fiber has an increasing advantage over cotton and other
    man-made fibers including nylon and acrylics. Given the
    predictability of polyester production, the relatively low price and
    its wider applications, polyester is expected to continue to replace
    cotton. The substitution of nylon as well as acrylic fibers with
    polyester fibers has gathered significant momentum over the last two
    decades. As a result significant investment in polyester fiber
    production capacity and the lack of correspondingly sizeable
    investments in acrylic and nylon fibers have changed the economies
    of scale in the synthetic fiber industry. Therefore it is unlikely
    that such dynamics will be reversed. The following chart illustrates
    the historical and forecasted consumer demand growth for polyester
    fiber for the periods indicated.

[]

Source: PAL October 2012

As reflected in the chart above, global polyester fiber consumer demand
has consistently grown and it is expected to continue to grow at steady
rates during this period. The higher than historical growth rate is
primarily attributed to robust demand from fast growing emerging
markets, especially China and India, as well as an increased
substitution of cotton.

Regional Consumer Demand Growth Outlook

Demand for polyester fiber is expected to grow across all regions from
2012E to 2015F. During this period, Asia, notably China, is expected to
continue to drive the demand for polyester fiber.

The following table illustrates consumer demand growth outlook for
polyester fiber for the periods indicated.

  ------- --- ------------------ -------- ------------------ -------- -------------
              Consumer Demand    Market   Consumer Demand    Market   CAGR

              2012E              Share    2015F              Share    2012E-2015F

              (Million tonnes)   (%)      (Million tonnes)   (%)      (%)

  World       42.9               100%     54.0               100%     8.0%
  ------- --- ------------------ -------- ------------------ -------- -------------

Source: PAL October 2012

In 2012E, the current estimated world average per capita consumption of
polyester fiber is 6.1 kg. The developed regions of North America and
the European Union have a per capita consumption of 11.0 kg and 10.0 kg,
respectively. In comparison, the developing regions of Central Europe,
Asia, South America, and the Middle East & Africa, have lower per capita
consumption of 6.8 kg, 6.4kg, 5.3 kg, and 2.1 kg, respectively.
Therefore, given the large gap of per capita consumption between the
developed and the developing regions, there is ample scope for growth in
the latter, most notably in Asia.

The following chart illustrates Polyester fiber per capita consumption
by region for 2012E.

[]

Substitution of Competing Fibers

Over the past decade, polyester fiber has been increasingly replacing
other fibers such as cotton, nylon, acrylic, and other fibers. The share
of polyester fiber in the total fiber market has increased from 38.7% to
55.4% from 2000 to 2012E. In the same period, the share of all other
competing fibers in the total fiber consumption has decreased, from
39.7% to 30.0% for cotton, from 21.6% to 14.6% for other fibers,
including nylon, acrylics, rayon and other natural and synthetic fibers.

The following chart illustrates the position of polyester fiber against
other fibers from 2000 to 2012E.

[]

Source: PAL October 2012

The following table summarizes global fiber market production forecast
for the periods indicated.

  ------------- -------------- -------- -------------- -------- -------------
                               Market                  Market   CAGR

                2012E          Share    2015F          Share    2012E-2015F

                (Million       (%)      (Million       (%)      (%)
                tonnes)                 tonnes)                 

  Polyester     43.5           55.4%    54.2           61%      7.6%
  Fiber                                                         

  Cotton        23.6           30.0%    23.2           26%      -0.5%

  Nylon         3.9            5.0%     4.0            5%       1.0%

  Acrylic       2.0            2.6%     2.1            2%       0.5%

  Others        5.5            7.0%     5.7            6%       1.3%

  Total         78.5           100%     89.2           100%     4.4%

                                                                
  ------------- -------------- -------- -------------- -------- -------------

Source: PAL October 2012

As reflected in the table above, polyester fiber is expected to solidify
its position against all other fibers. The share of polyester fiber in
the total fiber market is expected to increase from 55.4% to 60.8% from
2012E to 2015F. In the same period, the share of all other competing
fibers is expected to decrease or remain constant.

Polyester vs. Cotton

In the past decade, polyester fiber has gained market share against
cotton. In 2003, polyester fiber surpassed cotton as the most widely
used fiber in the world. The competition between the two fibers is
driven by a number of factors including:

  • product economics: polyester fiber is less expensive than
  cotton; and

  • product versatility: polyester fiber can be used in a wide range of
  end use products ranging from apparel to industrial products.

  • production predictability: unlike cotton, man-made polyester fiber
  production is not impacted by the elements;

Cotton is a natural fiber and its availability is dependent on a number
of factors including: (i) cotton prices relative to other cash crops,
(ii) the amount of land available for planting, (iii) availability of
water and (iv) weather conditions.

The chart below illustrates historical prices for cotton and polyester
staple fiber on an equivalent basis for the periods indicated.

[]

1. Asia PSF price 2. Average cotton spot price x1.17 (17% is an
adjustment for waste in the production process)

Source: PAL October 2012, IMF Agriculture Commodity Prices

As it can be seen from the chart above, polyester has been consistently
a better alternative to cotton in terms of product economics.
Historically, the long-term average price delta between polyester and
cotton has been US$0.71 per kilogram. In 2011, the price delta has
increased to US$2.3 per kilogram as a result of unprecedented cotton
shortage, therefore accelerating cotton substitution.

Going forward, polyester is expected to continue to increase market
share against cotton because cotton is constrained by supply.

The chart below illustrates historical and forecasted output for cotton
and polyester fiber production for the periods indicated.

[]

Source: PAL October 2012

Polyester Fiber vs. Synthetic Fiber

Polyester fibers are more economical to produce than other man-made
fibers including nylon and acrylic primarily due to scale. In addition,
the substitution of nylon as well as acrylic fibers with polyester
fibers has gathered significant momentum over the last two decades. As a
result significant investment in polyester fiber production capacity and
the lack of correspondingly sizeable investments in acrylic and nylon
fibers have changed the economies of scale in the synthetic fiber
industry. Therefore it is unlikely that such dynamics will be reversed.

Competitive Environment

In the polyester fiber industry, companies compete on a variety of
factors such as price, product quality, performance or specifications,
continuity of supply, customer service and breadth of product line. The
competition among existing players is varied and is predominantly
dependent on which sector the producer is focused on: commodity
polyester fiber or non-commodity polyester fiber. For a commodity
polyester fiber producer, the main pricing drivers are the raw material
cost and supply/demand balances, wherein prices are public and based on
cost-related formulas. For a non-commodity polyester fiber producer,
however, price is a reflection of the value added to the customer and
that value is decoupled from the raw material cost cycle. Given the
standardized product, the switching costs for the customers of a
commodity polyester fiber producer are low in relation to those for a
non-commodity polyester fiber producer. Commodity polyester producers
have a defined chemical entity and few parameters, whereas the
production process for non-commodity polyester fiber products has to be
adapted over time. Technical and customized service by a non-commodity
polyester fiber producer is critical and products are sold through
long-term customer specific commitments. For the commodity polyester
fiber producer, on the other hand, products are sold through standard
terms and technical service is irrelevant. There are low barriers to
entry for the commodity polyester fiber sector as the technology and
know-how is easily accessible. The non-commodity polyester fiber sector,
however, requires long-term experience and advanced technology with
patent protection in some cases. The commodity polyester fiber producer
sector has many players and competition is primarily driven by price,
aiming for higher market share and capacity utilization. In contrast,
the non-commodity polyester fiber sector has fewer players and
competition is primarily driven by product quality and customer service.
Overall, there is a high level of competition for the commodity
polyester fiber products and moderate to low level of competition for
the non-commodity polyester fiber products.

Global Market

The global polyester fiber industry is fairly fragmented with the top
twenty producers representing 52.1% of the global effective capacity.
Most of these producers are based in China and they sell to domestic
textile companies, who in turn sell final goods within China and
internationally. The differentiated players are not generally competing
against these players.

PTA Industry Overview

Introduction

In 2012E, the global PTA industry had an estimated production of
51.2 million tonnes. From 2007 to 2012E, global PTA demand grew at a
CAGR of 6.9%, from 37.0 million tonnes in 2007 to 51.0 in 2012E, driven
by strong polyester polymer production and ongoing substitution of
dimethyl terephtalate (“DMT”) as the polyester polymer intermediate of
choice. PTA has no other application other than being a key component in
the polyester polymer production process. In 2012E, 61.3% of PTA went
into production of polyester fiber, 31.4% into PET resin and 7.3% into
film and specialties.

Global PTA Market Overview

In 2012E, the global PTA industry was dominated by Asia, in particular
China, due to the substantial market size of the regional polyester
fiber and PET resin industries. Asia is both the largest producer and
consumer of PTA. North America, the European Union and Asia are net
exporters. South America, Central Europe and the Middle East & Africa
are net importers.

The table below summarizes the global PTA market structure for 2012E.

  --------------- ------------ ----------- ---------- ------------ ----------
                                                      Production   Demand

                  Production   Demand      Net Trade  Share        Share

                  (Million     (Million    (Million   (%)          (%)
                  tonnes)      tonnes)     tonnes)                 

  World           51.2         51.0        0.2        100%         100%
  --------------- ------------ ----------- ---------- ------------ ----------

Source: PAL October 2012

PTA Demand Dynamics

Key Demand Drivers

Demand for PTA is primarily driven by the following factors:

  • The growth in demand of end use markets, such as polyester fiber,
  PET resin and film and specialties; and

  • The continued substitution of DMT and the lack of other viable
  alternatives in the production of polyester polymer.

Global PTA Demand Growth Outlook

The following chart illustrates the historical and forecasted global PTA
consumption by end use for the periods indicated.

[]

Note: Numbers in parentheses represent CAGRs from 2000-2012E/2012E-2015F

Source: PAL October 2012

As reflected in the chart above, global PTA demand has been growing
consistently and is expected to continue to grow at steady rates. The
continued growth of global PTA demand is primarily driven by increased
production and demand for polyester fiber and PET resin.

Regional Demand Growth Outlook

The following table illustrates demand growth outlook for PTA for the
periods indicated.

  ------- --- ---------------- -------- ---------------- -------- -------------
              Demand           Market   Demand           Market   CAGR

              2012E            Share    2015F            Share    2012E-2015F

              (Million tonnes) (%)      (Million tonnes) (%)      (%)

  World       51.0             100%     64.9             100%     8.4%
  ------- --- ---------------- -------- ---------------- -------- -------------

Source: PAL October 2012

The increase in global PTA demand is expected to be driven primarily in
Asia, namely China, expanding at a CAGR 8.3%, in 2012E to 2015F, led by
the growth in the polyester fiber industry and to a smaller extent, the
PET resin industry. The projected growth rate from 2012E to 2015F in
other regions is predominantly a result of the increase in regional PET
production.

Competitive Environment

Key success factors

As PTA is a commodity product, competition is based mainly on price and,
to a lesser extent, on product quality and lead times to product
delivery.

In an environment characterized by a high level of price competition,
the leading producers have the following competitive advantages:

  • security of raw material supply; 

  • low cost manufacturing;

  • economies of scale;

  • downstream integration;

  • efficient logistics; and

  • customer proximity and market focus.

Global PTA Industry

The global PTA industry is relatively consolidated with the top fifteen
producers representing 78.7% of the global nameplate capacity. The
following table sets forth the global ranking of the leading market
participants in terms of nameplate capacity for 2012E.

  --------- -------------------- --------------- ----------------- --------
  Ranking   Company              Geographical    Nameplate         Share
                                 Presence        Capacity 2012E    

                                                 ('000 MT)          (%)

  1         Yisheng¹             China           9,375             15.4%

  2         BP Chemical          Worldwide       6,972             11.5%

  3         Mitsubishi           Asia            3,720             6.1%

  4         Sinopec              China           3,590             5.9%

  5         Formosa              Asia            3,000             4.9%

            Top 15 producers                     47,727            78.7%

            Others                               12,953            21.3%

            Total                                60,680            100.0%

                                                                   
  --------- -------------------- --------------- ----------------- --------

^(1.) 50:50 JV with Zhejiang Rongsheng and Zhejiang Hengyi

Note: Ranking based on October, 2012E nameplate capacity, and
Incorporates equity shares in each company

Source: PAL October 2012

Manufacturers of PTA can be classified between merchant producers and
integrated PTA producers. Merchant producers manufacture and supply PTA
to third parties, whereas integrated PTA producers manufacture PTA for
their own captive consumption. The major global merchant PTA producers
are BP Chemical, Mitsubishi Group, Samsung Petrochemical, Zhejiang
Yisheng Petrochemical Co., Ltd., and Mitsui Chemicals. The major global
integrated PTA producers are Sinopec Group, Reliance Industries Limited,
Formosa Group, Far Eastern Group and IVL.

North America

The North American PTA market is largely consolidated with only 4
players. As of 2012E, it is estimated that Alpek is the largest producer
with 2,800,000 tonnes of capacity, followed by BP Chemical with
2,385,000 tonnes, Cepsa with 625,000 tonnes, and Eastman with 240,000
tonnes. BP Chemicals, Eastman, Cepsa are merchant producers, whereas
Alpek is produces PTA primarily for internal consumption.

European Union

The European Union PET resin market is also consolidated with 7 players.
For 2012E, it is estimated that BP Chemical will be the largest producer
with 1,350,000 tonnes of capacity, followed by PKN Orlen with 625,000
tonnes, IVL with 561,000 tonnes, Lotte with 530,000 tonnes, Cepsa with
480,000 tonnes, La Seda de Barcelona with 425,000 tonnes and Schwedt
Refinery with 85,000 tonnes. The merchant European Union PTA producers
are BP Chemical, PKN Orlen, Cepsa and Schwedt Refinery. Lotte produces
PTA for internal consumption as well as for sale to external market. IVL
is fully downstream integrated.

Asia

The Asia PTA market is relatively consolidated with the top 5 producers
representing 45.4% of the regional capacity. For 2012E, it is estimated
that Zhejiang Yisheng Petrochemical Co., Ltd will be the largest
producer with 9,375,000 tonnes of capacity, followed by Mitsubishi Group
with 3,720,000 tonnes, Sinopec Group 3,590,000 tonnes, Formosa Group
with 3,000,000 tonnes and Yuan Dong with 2,600,000 tonnes. Other
important producers include Mitsui Chemicals, Reliance Industries
Limited, Samsung Petrochemicals, Sam Nam Petrochemical, Far Eastern
Group, Lotte Group, Dragon Group, and IVL. The major merchant regional
PTA producers are BP Chemical, Mitsubishi Group, and Mitsui Chemicals.
The major regional integrated PTA producers are Sinopec Group, Reliance
Industries Limited, Formosa Group, Far Eastern Group and IVL.

Raw Materials Industry Overview

PX Industry

PX is a petrochemical intermediate whose main use is for the production
of PTA.  In 2012E, the global PX industry had an estimated demand of
34.5 million tonnes.  Asia is by far the largest producer, consumer and
net importer of PX, whilst the Middle East and Africa is the largest
exporting region.  North America and the European Union are relatively
balanced.

The table below summarizes the global PX market structure for 2012E:

  ------- ----------- --------------- -------------- ---------- --------- --
                                                     Capacity   Demand    

          Capacity    Demand          Net Trade      Share      Share     

          (Million    (Million        (Million       (%)        (%)       
          tonnes)     tonnes)         tonnes)                             

  World   39.3        34.5            (0.2)          100%       100%      
  ------- ----------- --------------- -------------- ---------- --------- --

Source: PAL October 2012

The global PX industry is relatively consolidated with the top ten
producers representing 60.2% of the global nameplate capacity. The
following table sets forth the global ranking of the leading PX
producers in terms of nameplate capacity for 2012E.

  ---------- ------------------ --------------- ----------------- ---------
                                Geographical    Nameplate          

  Ranking    Company            Presence        Capacity 2012E    Share

                                                ('000 MT)          (%)

  1          Sinopec Group      China           4,565             11.6%

  2          Exxon Mobil        Worldwide       3,090             7.9%

  3          BP Chemical        Worldwide       2,797             7.1%

  4          JX Nippon Oil      Japan           2,480             6.3%

  5          Petrochina         China           2,000             5.1%

             Top 10 producers                   23,682            60.2%

             Others                             15,643            39.8%

             Total                              39,325            100.0%
  ---------- ------------------ --------------- ----------------- ---------

Note: Ranking based on October, 2012E nameplate capacity

Source: PAL October 2012

MEG Industry

MEG is produced from ethylene, via the intermediate ethylene oxide. The
primary use of MEG is in the manufacture of polyester fiber, PET resin
and film. In addition, MEG is also important in the production of
antifreeze, coolants, and solvents. In 2012E, the global MEG industry
had an estimated demand of 23.5 million tonnes. Asia has the largest
global capacity share, followed by the Middle East and Africa and North
America. Asia is the largest consumer of MEG as well as a significant
net importer along with the European Union. The Middle East & Africa are
the largest net exporter followed by North America.

The table below summarizes the global MEG market structure for 2012E:

  ------- ---------- -- -- ------------ ----------- -- --- -- --------------- ----- -- ---------- -- ---------- -- -- -------- ----- --
                                                                                                                                     

          Capacity         Production   Demand for            Non-Polyester            Net Trade     Capacity         Demand         
                                        Polyester             Demand                                 Share            Share          

          (Million         (Million     (Million              (Million                 (Million      (%)              (%)            
          tonnes)          tonnes)      tonnes)               tonnes)                  tonnes)                                       

  World   28.5             23.5         19.7                  3.8                      0.1           100%             100%           

                                                                                                                                     
  ------- ---------- -- -- ------------ ----------- -- --- -- --------------- ----- -- ---------- -- ---------- -- -- -------- ----- --

Source: PAL October 2012

The global MEG industry is relatively consolidated with the top ten
producers representing 68.4% of the global nameplate capacity. The
following table sets forth the global ranking of the leading MEG
producers in terms of nameplate capacity for 2012E.

+-------------------------------------+----------+------+------+-----+
|                                     |          |      |      |     |
|                                     |          |      |      |     |
|   --------- -------------           |          |      |      |     |
| -- ------------ ---------- -------- |          |      |      |     |
|             Geogr                   |          |      |      |     |
| aphical    Nameplate                |          |      |      |     |
|                                     |          |      |      |     |
|   Ranking   Company                 |          |      |      |     |
|       Presence     Capacity   Share |          |      |      |     |
|                                     |          |      |      |     |
|                         2012E       |          |      |      |     |
|                                     |          |      |      |     |
|                                     |          |      |      |     |
|                     ('000 MT)   (%) |          |      |      |     |
|                                     |          |      |      |     |
|   1         SABIC                   |          |      |      |     |
|       Saudi Arabia 4,220      14.9% |          |      |      |     |
|                                     |          |      |      |     |
|   2         MEGlobal                |          |      |      |     |
|       Worldwide    3,245      11.5% |          |      |      |     |
|                                     |          |      |      |     |
|   3         Sinopec G               |          |      |      |     |
| roup   China        2,513      8.9% |          |      |      |     |
|                                     |          |      |      |     |
|   4         Formosa                 |          |      |      |     |
|        USA/Taiwan   2,130      7.5% |          |      |      |     |
|             Petro                   |          |      |      |     |
| chemical                            |          |      |      |     |
|                                     |          |      |      |     |
|   5         Shell                   |          |      |      |     |
|        Worldwide    2,045      7.2% |          |      |      |     |
|                                     |          |      |      |     |
|             Top 10                  |          |      |      |     |
|                    19,323     68.4% |          |      |      |     |
|             produ                   |          |      |      |     |
| cers                                |          |      |      |     |
|                                     |          |      |      |     |
|             Others                  |          |      |      |     |
|                    8,912      31.6% |          |      |      |     |
|                                     |          |      |      |     |
|             Total                   |          |      |      |     |
|                   28,234     100.0% |          |      |      |     |
|   --------- -------------           |          |      |      |     |
| -- ------------ ---------- -------- |          |      |      |     |
+-------------------------------------+----------+------+------+-----+
|                                     |          |      |      |     |
+-------------------------------------+----------+------+------+-----+
|                                     |          |      |      |     |
+-------------------------------------+----------+------+------+-----+

Note: Ranking based on October, 2012E nameplate capacity, and
Incorporates equity shares in each company

Source: PAL October 2012

The global MEG industry is relatively consolidated with the top ten
producers representing 68.4% of the global nameplate capacity. The
following table sets forth the global ranking of the leading MEG
producers in terms of nameplate capacity for 2012E.

PEO Industry

Introduction

PEO (Purifled Ethylene Oxide) is manufactured by reacting ethylene with
pure oxygen over a silver coated catalyst at a temperature of
approximately 500°F. Globally, the manufacture of EO accounts for about
14% of ethylene consumption. EO is purified for the production of
ethoxylates, ethanolamines and other intermediates. Most often, it is
hydrated to Ethylene Glycols (MEG, DEG and TEG)

Global PEO Demand

The EO market has relatively stable and less-cyclical demand due to end
market applications which include detergents and agrochemicals. Global
PEO demand increased by approximately 600,000 tonnes, led primarily by
the surge in demand in China. This growth in EO demand is attributable
to the increased demand in EG and surfactant markets.

U.S. PEO Demand

Around 77% of the U.S. PEO end-use demand in 2011 was mainly driven by
Ethylene Glycols, followed by surface-active Ingredients 11%,
Ethanolamines 5%, Glycol Ethers 3% and others 4%.

While historically EO plants have had provisions for both EO and
Ethylene Glycols, the trend in the market is to build glycol only
capacity. This trend further exacerbates the short supply position of
purified EO. Analysts forecasted the demand for PEO to remain at
approximately 1.0-1.5x GDP levels.

The U.S. PEO industry is experiencing several trends that are spurring
increased prices and margins including the following;

-   The use of alcohol ethoxylates (PEO derivatives) as a replacement of
    less environmentally friendly" nonylphenol surfactant chemistry;

-   Increasing growth in general cleaning surfactant chemistry;

-   EO derivatives, such as personal care and agrochemical products, are
    expected to grow well over GDP levels;

-   The U.S. gulf coast is a low-cost provider and;

-   Growing internal demand from manufacturers of PEO derivatives leaves
    less capacity available for non-integrated PEO consumers

Global PEO Supply

The global market for EO is relatively fragmented with the ten largest
PEO producers accounting for less than 45% of the total market.

Over the next five years, analysts anticipate global capacity to
increase by an average of 2-3% per year, which will be driven by
increased demand from downstream players. These capacity expansions are
anticipated to occur in the Middle East and Asia. These limited capacity
additions combined with higher demand are also expected to yield
utilization improvements of existing plants of approximately 5% per
year. However, this increasing capacity will not be enough to satisfy
growing demand, resulting in continued expected increases in EO prices
and margins. EO derivatives, such as personal care and agrochemical
products, are expected to grow well over GDP levels.

U.S. PEO Supply

The U.S. PEO market is relatively consolidated with 7 producers. With
the total U.S. PEO capacity of 2,305,000 tonnes in 2011, Dow Chemicals
is the largest PEO producers with 43.6% of the total capacity, followed
by Huntsman 15.4%, Shell 12.8%, BASF 9.8%, IVL 8.7%, Equistar 7.9%, and
Texas Eastman 2.0%. All U.S. PEO producers are merchant producers, and
the largest merchant producer is IVL, with account of 35.8% of total
merchant supply

The majority of U.S. PEO producers are integrated forward into EG
production and some of the larger PEO producers, including BASF,
Equistar, Dow, Huntsman, and Shell, are also integrated backwards into
ethylene production.

Industry analysts anticipate North American PEO production capacity to
be flat, with no confirmed additional new production in North America
over the next five years. The new entrants are expected given the high
barriers to entry including permitting, regulatory, environmental and
logistical issues.