Union Gas Holdings has signed a non-binding letter of intent (LOI) with Worldbridge Industrial Developments (WBID) to form a proposed joint venture company (JVCo) for the distribution and supply of liquefied petroleum gas (LPG) in Cambodia on March 10.

Business activities and operations of supplying LPG in Cambodia is expected to take place by the end of 2021.

The strategic partnership marks the first overseas foray for the fuel products provider, and will aid the group in expanding its operations overseas.

Union Gas and WBID were said to be in discussions to explore a potential strategic partnership previously, but were held back due to the Covid-19 pandemic in 2020.

Under the agreement, Union Gas will hold a 55% stake in the JVCo, and will send “experienced management staff” from its Singapore office to support the local Cambodian staff.

The remaining 45% stake will be held by WBID, who will provide the JVCo with access to its local business network and connections in Cambodia.

WBID is part of the WorldBridge International Group, a conglomerate that actively pursues investments in national industries in Cambodia.

According to Union Gas, the proposed JV “represents an opportunity… to partner with an established local enterprise in Cambodia with a fast-growing property development portfolio”.

“In doing so, the group would have the opportunity to lend its expertise and experience in supplying and distributing LPG to buyers of properties developed by the World Bridge International Group,” it adds in a March 10 statement.

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The group says it intends to adopt a “cautious approach” with an initial modest investment before expanding and growing its overseas business, as this is its first investment and expansion into a different geographical territory.

“This development is the fulfilment of our group’s long‐time goal to venture abroad. We are very pleased to have found an esteemed partner in WBID to plan our first move overseas in a fast‐growing emerging market,” says Union Gas’ executive director and CEO Teo Hark Piang.

“However, we are mindful that we will need time to familiarise ourselves with the local regulatory and market environment and therefore we have approached this venture with caution including starting with a modest initial investment and choosing the LPG business in which we have core competencies,” he adds.

“The proposed joint venture marks an entry point to the Mekong region for Union Gas. It is a region that is still developing and building infrastructure as it urbanises, not unlike how Singapore was over 40 years ago when we started our business, and that is where we can contribute our experience to the market.”

This partnership creates an opportunity for the Group to supply and distribute LPG to buyers of WorldBridge International Group’s fast‐growing property development portfolio of residential, commercial and industrial projects across all the major cities in the Kingdom of Cambodia,” he says.

Shares in Union Gas closed 1 cent lower or 1.4% down at 69.5 cents on March 10.