Krakatau Posco plans to set up 23 new subsidiaries to provide a variety of products and services to the joint venture between Indonesia’s Krakatau Steel and South Korea’s Posco, a top executive said.
The plan was announced by Krakatau Steel’s president director, Fazwar Bujang, in Jakarta on the weekend.
Krakatau Posco, based in Cilegon, Banten, plans to develop the capacity to produce 3 million tons of slabs and plates per year. The total cost of the project is $6 billion.
Wawan Hermawan, vice president for corporate communication at Krakatau, said it was not surprising that the joint venture planned to create numerous subsidiaries, because the scale of the project required a significant range of inputs.
Wawan said the model of the new subsidiaries had not been announced.
He added that the new units would boost local economies where they are built.
“Clearly the Krakatau Posco project will bring in other industries into Indonesia, considering Posco is inviting several companies from South Korea into Indonesia,” Wawan said.
Fazwar previously said the company had budgeted $400 million to $450 million for its expansion this year.
About 70 percent of the financing for this capital expenditure will come from bank loans, of which half is expected to be provided by foreign banks.
“If there are loan limitations from foreign banks, then 50 percent of the lending can be arranged from domestic banks. There are two or three banks ready to facilitate this financing,” Fazwar said.
Posco is the world’s third biggest steelmaker. Krakatau Steel is Indonesia’s largest maker of the metal. Posco already operates two integrated steel mills in Pohang and Gwangyang, both in South Korea.