Reports to the Stock Exchange

As PTA is a commodity product, competition is based primarily 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. As of September 30, 2009, 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. Moreover, in international export markets we also compete with PTA merchant producers located in Asia, Europe, and the United States, including BP Chemical, 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. There are no material anti-dumping or import duties or tariffs on PTA in Europe, North America, or Asia. However, China is considering imposing anti-dumping duties on PTA products from Thailand and Korea. We do not expect any imposition of these duties to have a material adverse effect on our PTA business. 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. Environmental Impacts Our production facilities generate 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 waste water in several stages to comply with applicable regulations before the waste water 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. On January 8, 2010, Indorama Petrochem received a letter from the Industrial Estate Authority of Thailand ("IEAT") informing it that, following an inspection of the Indorama Petrochem PTA facility, Indorama Petrochem is disposing of production waste by burning such waste using a thermal oxidizer without the requisite approval from the DIW. In addition, there were signs of chemical leakage at the thermal oxidizer, the nitrogen oxide and carbon monoxide emissions from the stack of the thermal oxidizer and the vent scrubber, respectively, exceeded applicable maximum permissible limits and a chemical odor originated from the facility. As a result, the IEAT ordered Indorama Petrochem to immediately cease the treatment of waste using the thermal oxidizer and make improvements to its air pollution treatment system by February 15, 2010. Indorama Petrochem has shut down the thermal oxidizer since January 12, 2010, carried out rectification of leaks and will not treat waste using the thermal oxidizer until it receives the requisite approval from the DIW to do so. Indorama Petrochem submitted the application for the requisite approval to the DIW on January 13, 2010. Indorama Petrochem can operate its PTA facility at its full installed capacity even without the thermal oxidizer operating. Until the thermal oxidizer resumes operations, Indorama Petrochem has hired an authorized contractor to physically remove the waste from its PTA facility for disposal periodically. Prior to such waste being removed, it is collected from the production process and stored in sealed vessels at the Indorama Petrochem PTA facility until its removal by the authorized contractor. We believe the waste disposal method adopted by Indorama Petrochem is odor-free and environmental issues are unlikely to occur if the waste is stored and removed properly. Indorama Petrochem has the requisite license to remove such waste up to a specified amount from its premises. The licensed amount is sufficient for approximately three months and application may be made to increase such amount from time to time. We do not expect the removal of waste for disposal by authorized contractors to have a material impact on our costs of goods sold. Under relevant Thai regulations with respect to the disposal of waste, the authorized contractor will be responsible for the waste after it accepts such waste for disposal and signs a Uniform Hazardous Waste Manifest. Based on the latest reading conducted by an independent licensed inspector on January 13, 2010, the carbon monoxide emission level is below the maximum permissible limit applicable to Indorama Petrochem. Because the thermal oxidizer has been shut down, it is not possible to take new readings of the nitrogen oxide emission level until approval from the DIW is obtained and operations of the thermal oxidizer resume. Indorama Petrochem plans to hire an independent licensed inspector to take readings of the nitrogen oxide emissions level at that time. If such level is above the maximum permissible limit, Indorama Petrochem intends to shut down the thermal oxidizer and undertake rectification works so that the nitrogen oxide emission level from the thermal oxidizer is within such limit, and will continue to engage the authorized contractor to remove waste for dispoal until the nitrogen oxide emission level from the thermal oxidizer is within such limit. Indorama Petrochem intends to continue to hire independent licensed inspectors to periodically re-check the carbon monoxide emissions level to ensure that such level is within the maximum permissible limit when the IEAT inspects the PTA facility on or before February 15, 2010. On January 14, 2010, the IEAT sent a letter acknowledging Indorama Peterochem's prompt actions to resolve the issues raised in its earlier letter. Indorama Petrochem believes that the actions it has taken will result in nitrogen oxide and carbon monoxide emission levels falling within maximum permissible limits. Other than as described above, 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 2006, 2007, 2008, and 9 months in 2009 ended 30 September, 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 (Please see further detail described in "Lawsuit") Summary of Material Contracts 1. Lease agreement In 30 September 2009, the Company has made major lease agreements of over 3 years term for business purpose. The following summarizes our long-term lease agreements. 1. PET Business AlphaPet AlphaPet has entered into a ground lease agreement with BP for approximately 40 acres of land located within the Decatur site to construct the improvements necessary to operate the AlphaPet PET Facility. The lease is for a term of 20 years, extendable at AlphaPet's option for two extension terms of 20 years each. Orion Global Pet Orion Global Pet has entered into a sub-lease agreement with UAB Klaipeda Free Economic Zone Management Company (the "Management Company") for a land plot of approximately 3,7613 hectares. The sub-lease is for a term of 99 years. 2. Polyester Fiber and Yarn Business Indorama Polyesters Industries Indorama Polyesters Industries has entered into a land lease agreement in the Map Ta Phut Industrial Estate with the IEAT relating to facility construction and performing business in polyester production (Polyester Staple Fibre, Polyester Pre-Oriented Yarn, Polyester Draw Texture Yarn) with a total area of approximately 200 Rai. The term of the lease is 30 years, expiring on May 12, 2018. Upon every ten-year period, the leaser is entitled to a 10% adjustment of then prevailing rent. On the last year, no less than 6 months before contract termination, if the lessee wishes to continue to rent the property, the lessee must report in written document to the leaser and the leaser may continue the contract for 20 more years. Indorama Polyesters Industries assigned the leasehold rights under such lease agreement to secure the loan and credit line received from a bank in Thailand. 3. PTA Business TPT Petrochemicals TPT Petrochemicals has entered into a land lease agreement in the Map Ta Phut Industrial Estate with the IEAT relating to land with a total area of approximately 150 Rai. The term of the lease is 30 years, expiring on February 6, 2022. Upon every ten-year period, the leaser is entitled to a 10% adjustment of then prevailing rent at every 10 year. On the last year, no less than 6 months before contract termination, if the lessee wishes to continue to rent the property, the lessee must report in written document to the leaser and the leaser may continue the contract for 20 more years. Indorama Petrochem Indorama Petrochem has entered into a lease agreement in the Eastern Industrial Estate and Map Ta Phut Industrial Estate with Eastern Fluid Transport Co., Ltd. relating to land for the piping support system in its PTA facility. The term of the lease is 15 years, expiring on January 8, 2021. Rent payment is Baht 27,600 per annum per 1 rai. The leaser is entitled to a 10% adjustment of the prevailing rent at every 10 year. On the last year, no less than 6 months before contract termination, if the lessee wishes to continue to rent the property, the lessee must report in written document to the leaser and the leaser may continue the contract for 20 more years Indorama Petrochem has also entered into a tank farm storage and service agreement with Thai Tank Terminal Limited on December 8, 2004 for the storage of PX and acetic acid in its PTA production. The lease term is 15 years renewable at Indorama Petrochem's option at a rent rate specified in the agreement. IRH Rotterdam As part of our acquisition of the Eastman Chemicals' assets in Rotterdam, IRH Rotterdam has the benefit of a transfer deed whereby IRH Rotterdam has obtained the temporary leasehold right originally granted by the Municipality of Rotterdam to Eastman Chemicals in relation to four parcels of land on which the IRH Rotterdam PTA facility and the IRP Rotterdam PET facility are located, as well as the jetty located nearby. The term of the temporary leasehold right expires on February 20, 2093. The ground rent is subject to annual adjustment based on the consumer price index. In addition to the ground rent, the leaseholder also has to pay berthing dues. IRH Rotterdam has entered into a sub-lease agreement with IRP Rotterdam to sub-let the land parcels on which the IRP Rotterdam PET facility is located. The term of the sub-lease expires on February 20, 2093. 2. License Agreement, dated 16 November, 2009 Counter Party: Licensor: Lohia Global Holdings Limited Licensee: Indorama Ventures Public Company Limited Relationship: Mr. M.L. Lohia is a major shareholder and a director of Lohia Global Holdings Limited and is a father of Mr. S.P. Lohia and Mr. Aloke Lohia who are directors of the Company. Rationale of Transaction: Lohia Global Holdings Limited own the "Indorama" name and has granted to the Company a non-exclusive transferable license for a perpetual period to use the "Indorama" name worldwide. IVL is entitled to sub-license the use of the "Indorama" name to its subsidiaries. Terms and Fee: IVL is granted to use the "Indorama" name for a perpetual period and IVL has to pay royalty fees in accordance with the Royalty Fees Agreement, dated 16 November, 2008. 3. Royalty Fees Agreement, dated 16 November, 2009 Counter Party: Licensor: Lohia Global Holdings Limited Licensee: Indorama Ventures Public Company Limited Relationship: Mr. M.L. Lohia is a major shareholder and a director of Lohia Global Holdings Limited and is a father of Mr. S.P. Lohia and Mr. Aloke Lohia who are directors of the Company. Rationale of Transaction: IVL has to pay such fees in connection with the License Agreement of use the "Indorama" name with Lohia Global Holdings Limited as above. Terms and Fee: IVL has to pay royalty fees to Lohia Global Holdings Limited at rate of US$0.5 per producing ton by IVL (excluding inferior products) but not exceeding 1% of EBT based on audited financial statement of IVL. The payment of fees will be made quarterly with effective on 1 March, 2009. Feasibility Study - None - Technical and Management Assistance - None - Future Projects Our objectives are 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 intend to continue increasing our exposure to markets opportunities, which we believe provide us with potential opportunities, with a keen emphasis on the BRIC regions as well as the Middle East. We intend to explore opportunities, including in Europe, to invest in or acquire large scale, latest generation assets, including PET production facilities with a capacity of approximately 150,000 tonnes per annum. This will contribute to a sustainable and competitive position on the cost curve, acquire value enhancing assets and continue to expand and debottleneck our capacities at existing production facilities. 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. 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. 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 intend to expand the capacity at the Petform packaging facility by an additional two preforms machines, one bottle blowing machine and two closure machines with a total estimated cost of US$11.5 million. We expect to commence commercial operations of the new machines in the second quarter of 2010. We also intend to de-bottleneck the capacity of the polyester production line at the Indorama Polyester Industries Map Ta Phut polyester facility to produce polyester staple fiber, and install machinery to produce ultra fine polyester fibers (FDY). We estimate the total cost of these projects to be approximately US$5.1 million. We expect to complete these projects in the second quarter of 2010. We expect to finance these Petform and Indorama Polyester Industries projects through a new loan and internal cash. Related Transactions For the year ended 31 December 2008 and for the nine-months ended 30 September 2010, the Company has related transactions with persons who have potential conflict of interest with the Company i.e., shareholders, related companies having common shareholders or directors, associated companies, and related joint venture, which are described in "Notes to Financial Statements". The major related transactions are as follows: (I) Normal Business transactions 1. IVL/Subsidiary-Party having Conflict of Interest: Petform (Thailand) Ltd - Sermsuk Pcl. Relationship: Sermsuk Pcl. is a major shareholder of PFL, holding 40% shares. Common Director: Mr. William Ellwood Heinecke is a director of IVL and Sermsuk Pcl. Type of Transaction Unit: Baht million Type of Transaction Year Ended 9 Months Ended 31 December, 2008 30 September, 2009 - Sale of Preforms 259.46 185.06 - Sale of closures 60.86 44.12 - Sale of bottles 363.54 288.82 Total 683.85 518.00 Accounts Receivable 125.02 117.11 Necessity and reasonableness: Petform (Thailand) Ltd is a joint venture company between IRP and Sermsuk for manufacturing preforms, closures and bottles for Pepsi bottles & water bottles application. Petform (Thailand) Ltd's major customer is Sermsuk who buy preforms, closures and bottles from PFL and use the same for blowing/ filling with Pepsico products. Pricing method: Pricing between PFL and Sermsuk Pcl. is decided based on negotiations with Sermsuk Pcl. and such prices are driven by market prices. Generally prices are changed when there is major change in market conditions. Terms of credit: 30 days credit. The credit period conform to normal credit days given to other customers in the local market Going Forward: This normal business transaction will continue on the underlying commercial terms. 2. IVL/Subsidiary-Party having Conflict of Interest: Indorama Petrochem Ltd. - Indorama Synthetics (India) Ltd Relationship: Mr. O.P. Lohia major shareholder of Indorama Synthetics India is blood brother of Mr. Aloke Lohia Mr. Aloke Lohia director of Indorama Petrochem Ltd. Type of Transaction: Unit: Baht million Type of Transaction Year Ended 9 Months Ended 31 December, 2008 30 September, 2009 Indorama Petrochem Ltd sold PTA to Indorama - 678.36 Synthetics (India) Ltd. Accounts Receivable - 187.53 Necessity and reasonableness: Indorama Synthetics Ltd. is a Polyester manufacture and distributor, which use PTA for raw material. Pricing method: Negotiated per market rate as applicable to other customers. Terms of credit: (more)