POSCO agrees on 55 percent stake in JV with Krakatau Steel

Monday, 28 June 2010 13:58:18 (GMT+3)   |  
       

After long lasting negotiations, Indonesia's largest steelmaker PT Krakatau Steel has finally secured a larger portion of ownership in its joint venture with South Korean steel giant POSCO.

Indonesia's State-Owned Enterprises Minister Mustafa Abubakar said Krakatau Steel would control 45 percent of the planned steel plant in Tangerang, Banten, while POSCO will control the remaining 55 percent, according to the Indonesian press. The companies will sign a joint venture agreement by the end of July this year, two months later than originally planned.
 
The portion of shares owned by each company, however, does not reflect the share of investment in the plant's construction. POSCO will be responsible for 70 percent of construction costs, while Krakatau will meet the remaining costs, as stated in the preliminary agreement in December, Minister Abubakar said.
 
The minister declined to elaborate on why the plant ownership composition did not reflect the initial share of investment as agreed in preliminary negotiations between the two companies.
"POSCO insisted on controlling 70 percent of the shares, while Krakatau also demanded 45 percent, so this is a compromise solution for the two companies," he said.

Construction of the new plant, which will take three years, is expected to start next year and is estimated to cost $6 billion in total investment. Upon completion, the plant will have an annual production capacity of five million metric tons of steel plates of up to four meters in width.
 
The steel plates, generally used for ship building, will be sold to Vietnam, South Korea, China and Singapore. Krakatau, the biggest steelmaker in Indonesia, aims to increase its production from about 400,000 tons of steel products to 2.8 million tons this year to meet rising domestic demand, which is expected to grow by 12 percent year on year.


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