The proposed tie-up between Indonesia’s largest steel producer, PT Krakatau Steel, and South Korea’s Pohang Iron & Steel faces another delay.
Industry Minister MS Hidayat said on Thursday that the signing of the joint-venture agreement might be delayed by two months by a lack of agreement over the ownership structure.
Coordinating Minister for the Economy Hatta Rajasa confirmed on April 4 that the South Korean company, also known as Posco, would proceed with the $6 billion joint venture with state-owned Krakatau, which is expected to produce as much as 5 million tons of steel a year.
Posco and Krakatau were expected to sign an agreement on the joint venture this month.
“It will be delayed for another one to two months … the companies are still discussing the percentage of shareholdings,” Hidayat said.
Under a preliminary agreement signed in December, Krakatau was to take a stake of 30 percent to 45 percent in the company, which will run an integrated steel mill in Tangerang, Banten, with Posco controlling the rest.
Hidayat said the delay was linked to concerns over how Krakatau’s planned initial public offering would affect the ownership of the joint venture.
He said the talks were also taking longer than expected because Krakatau was busy planning for its IPO, which is scheduled for November.
Asked whether there was difficulty licensing the planned joint venture, Hidayat said: “No, it is more about corporate matters, not because of licensing.”
Krakatau president director Fazwar Bujang on Thursday acknowledged the delay, telling the Jakarta Globe: “Many issues need to be settled between the two companies.”
He said they were still discussing issues such as the choice of directors, as well as the firms’ stakes.
Fazwar dismissed the suggestion that the delay was caused by the company’s IPO plans.