POSCO, South Korea's largest steelmaker, has dropped its plan to acquire Dongbu Steel's Incheon plant and a power station in Dangjin under the wing of Dongbu Group, a cash-starved local conglomerate, due to associated financial burden, the company's chief executive said Tuesday.
In a meeting with reporters, POSCO CEO Kwon Oh-joon said POSCO, which is trying to concentrate on core business areas and reduce unnecessary outlays, has decided not to pursue the "package deal" to buy the steel mill and Dongbu Power Dangjin Corp.
"The financial burden associated with the takeover outweighed any benefits for POSCO as a whole," Kwon said.
He pointed out that close review of the portfolio of Dongbu mill showed the color steel plates made there, overlapped with products from POSCO Coated & Color Steel Co., one of the steelmaker's affiliates.
Kwon said taking over the Incheon plant would not ensure more market presence or more profits.
The steelmaker had studied books of the two units of Dongbu Group after Korea Development Bank, the main creditor of the group, made an offer in March.
Kwon's remarks are expected to push back efforts by Dongbu Group to carry out a 3 trillion won ($2.95 billion) debt restructuring program aimed at allowing the conglomerate to get back on its feet more quickly.
Kwon also took a reserved stance on only buying either the power plant or the steel mill separately.
The CEO said that POSCO has already been tapped as the primary negotiating partner for the purchase of Tongyang Power's 2 million kilowatt coal-fired thermal power plant in Samcheok, an eastern coastal city. The steelmaker said it wants to buy the power plant for 431.1 billion won.
On speculation that POSCO will sell off Daewoo International Corp., Kwon said any plans have been withdrawn because no buyer exists at present.
He said for now there is actually no need to restructure the trading company.
In regards to future growth engines, the executive said the company is making strides in the commercial lithium market, with the pilot plant in Argentina set to open late this year helping to make inroads into the field. Lithium is a key material used to make electric cars and various mobile power packs.
Kwon then said efforts will be made to list POSCO Energy on the local stock exchange within the year. (Yonhap)