Madrid (Platts)--21Jan2011/747 am EST/1247 GMT

Gita Holdings, the Swiss-based fund that has agreed to buy polyvinyl chloride producer Vinyls Italia, plans to increase production capacities and modernize facilities at two of the Italian company's sites, a union official said Friday.

Gita will invest at least Eur300 million ($406 million) to increase combined PVC capacity at Porto Marghera and Porto Torres to 475,000 mt/year with chlorine capacity rising to 360,000 mt/year, caustic soda capacity to 395,000 mt/year and ethylene dichloride capacity to 500,000 mt/year in the next six years, Gianluca Bianco, spokesman for Federazione Energia Moda Chimica union said in a telephone interview.

The Swiss fund has agreed to buy and restart Vinyls Italia assets at Porto Marghera, Porto Torres and Ravenna, all of which were halted in May 2009 as the company went into liquidation. The assets are owned by Italian oil major Eni and its chemical subsidiary Syndial. Gita, which will form an Italian-based company to manage the operation, could not be reached for comment.

"We are cautiously optimistic," Bianco said, adding: "It won't be easy to get the plants running again and it will require some tens of millions of investment, but Gita has shown itself prepared to do so." Bianco and other union heads met with Gita representatives for the first time Thursday.

Gita signed a memorandum of understanding with Italy's Economic Development Ministry to present a final bid for the assets on February 15, with the closing due for March 10.

Other PVC market sources have voiced doubts about the functionality of the plants after such a long break. The main concerns regard corrosion of vital machinery but there are also doubts about the economic viability of the operation.

While some "conservative maintenance" was carried out last year, the plants have been otherwise fully closed, Bianco said. He added that Gita had declared itself committed to a full modernization of the chlorine cycle as a way of improving economic efficiency.

The company is targeting an increased PVC production capacity of 475,000 mt/year at the two sites, up from an existing capacity of 265,000 mt/year. it will also modernize the chlor-alkali plant at Porto Marghera to more efficient and EU-compliant membrane technology, at the time increasing output to 160,000 mt/year from 140,000 mt /year. It also intends to increase vinyl chloride monomer production at Porto Torres. No modernization plans for Ravenna were outlined.

"The idea is to balance out the capacity for the PVC, so there are no shortages," Bianco said. Chlorine are ethylene are the basic feedstocks for PVC, which is made via intermediates EDC and VCM. Caustic soda, used by the aluminium and paper industry is a by-product of chlorine extraction from brine.

The company and unions have a timetable of between two and four months for restarting production at the sites. Production of PVC and other petrochemicals would be adjusted to market needs, Bianco said.

With the construction sector at a low ebb due to the economic cycle as well as the seasonal winter downturn, PVC producers have been looking to increase prices this month to stave off negative margins caused by large contract price increases for ethylene.

PVC was assessed Wednesday at $990/mt-$1,010/mt FOB NWE.

--Luca Baratti, newsdesk@platts.com

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