The top management at POSCO, the nation’s top steelmaker, on Tuesday said it has decided to pull out of a package bid for Dongbu Group’s Incheon Steel Plant and a coal-fired thermal power plant in Dangjn.
POSCO had been conducting due diligence on the request of the Korea Development Bank, the main creditor of the financially faltering Dongbu Group.
“Based on the results, we concluded that the synergy effect from the deal would not be big enough, considering the financial burden,’’ POSCO chairman Kwon Oh-joon said in a press conference.
The conference was held at POSCO’s Seoul office in southern Seoul to mark Kwon’s 100th day as chairman.
The decision had been anticipated since Korea Investors Services lowered POSCO’s credit rating from “AAA” to “AA+” on June 11. It was the first time the nation’s top rating agency downgraded the company in the past two decades.
In addition, industry watchers said POSCO Energy’s recent takeover of Tongyang Power made it more difficult for POSCO to give green light on another multibillion won deal.
POSCO won the deal to take over Tongyang Power, an energy business of cash-strapped Tongyang Group, for 430 billion won ($422 million) last week. Tongyang Power owns a business license to build and operate a thermal power plant in Samcheok, Gangwon Province.
POSCO had pursued the project based on the belief that the thermal power business could become its new growth engine.
“I am sure that the thermal power business could create value based on POSCO’s knowledge and experiences in the coal and power business,’’ Kwon said.
Reflecting such keen interest, the CEO said POSCO remains open to review the Dongbu’s power plant deal again when the plant is put up for sale, split from the steel plant. “POSCO has an interest in coal-powered plant business as a growth engine,’’ he said.
Meanwhile, regarding the outlook for the group’s core steel business, Kwon said it will take more time to see a turnaround mainly due to oversupply in the region.
By Seo Jee-yeon (
jyseo@heraldcorp.com)
