Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Exclusive: South Korea steel giant POSCO weighs how to exit Myanmar military-backed venture - sources

Stock MarketsApr 05, 2021 05:05AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
2/2 © Reuters. The logo of POSCO is seen at the company's headquarters in Seoul 2/2

By Cynthia Kim

SEOUL (Reuters) - Giant South Korea steelmaker POSCO (NYSE:PKX) has begun reviewing how it might end a joint venture with a firm controlled by the military in Myanmar in the wake of the coup there in February, two people with first-hand knowledge of the matter told Reuters.

As Myanmar's army rulers continue a deadly crackdown on protest, with hundreds killed, the people said the Korean parent's POSCO C&C arm is looking into either selling its 70% stake in the venture with Myanmar Economic Holdings Ltd (MEHL), or buying out its partner's stake. It wasn't immediately clear how much the 30% holding might be worth.

The internal discussions come amid growing scrutiny from shareholders and rights activists on international businesses still operating partnerships in Myanmar. Firms from Australia's Woodside (OTC:WOPEY) Petroleum and Japan drinks giant Kirin Holdings are among those who have already pulled the plug.

MEHL is among Myanmar military entities recently sanctioned by the United States and Britain. POSCO C&C has repeatedly said it hasn't paid dividends to MEHL since the 2017 Rohingya crisis drew international criticism of Myanmar's military.

But the people with knowledge of the matter say POSCO is wary of an abrupt steel exit because it could potentially jeopardise hundreds of millions of dollars earned from more lucrative gas projects operated jointly with another Myanmar state firm by an affiliate, Posco International.

"We won't want to run the business like we do now, and we are reviewing restructuring our Myanmar operation," one of the two sources with knowledge of the discussions told Reuters. The people declined to be identified citing internal company policy.

"This doesn't mean we are rushing to make any decision, but two options that could potentially take place include selling our stake or buying out their (MEHL's) stake."

POSCO C&C previously said its business would not be hit by sanctions, and that it will only take action if it finds that MEHL is directly involved in the coup.

MEHL didn't respond to Reuters' request for comment.

'BIG BUCKS'

The profits POSCO makes from the Myanmar steel business - about 2 billion won ($1.77 million) last year - are dwarfed by earnings from Myanmar gas projects.

About two thirds of the operating profit at Posco International came from latter last year - around 300 billion won ($265.5 million) - in partnership with local state energy firm Myanmar Oil and Gas Enterprise (MOGE).

"Relatively speaking, (the) steel sheets business isn't making big bucks. And its ownership structure is much simpler than some of POSCO's other businesses in Myanmar," the second source at the company said.

"But if we exit, it would be important to say 'bye' on good terms."

Total of France and U.S.-based Chevron (NYSE:CVX) have also worked for decades with MOGE, which is yet to come under sanctions, although the UN's human rights investigator last month called for coordinated sanctions.

Exiting steel rather than gas would also be simpler due to a more complex ownership structure in the latter venture, the sources said.

While Posco International controls the gas projects via its 51% stake, India's Oil and Natural Gas Corp (ONGC) and GAIL own 17% and 8.5% stakes respectively.

PRESSURE BUILDING

International pressure against the military and companies that have ties with it has steadily risen since February, with death toll close to 550 in the two months since the generals overthrew Aung San Suu Kyi's elected government.

Shin Mee-jee at South Korea's People's Solidarity for Participatory Democracy was among those at pressure groups who said the country's huge national pension fund - the National Pension Service (NPS) - should exert pressure on POSCO to cut ties with Myanmar's military.

NPS is the largest shareholder in POSCO, with an 11.1% stake worth $2.42 billion, and the world's third-biggest pension fund overall with nearly $1 trillion in assets.

"What a nonsense, to see our taxpayers' money being channeled to kill the people of Myanmar through the (pension) ... The government also needs to be more responsible about where the pension fund's money is going," Shin said.

An NPS spokesperson declined to comment when asked if the fund or its governing committee would take action to possibly exclude POSCO from its fund.

Meanwhile European investors are taking a greater interest in POSCO's plans for Myanmar.

Sweden's public pension fund, which owns POSCO shares, told Reuters it has quizzed the company over its Myanmar investments as it is concerned about human rights issues in the country.

Meanwhile Nordic investor Nordea told the Swedish arm of the Fair Finance network, initiated by Oxfam, that it had put POSCO "in quarantine until further notice" regarding its Myanmar plans.

($1 = 1,128.6400 won)

Exclusive: South Korea steel giant POSCO weighs how to exit Myanmar military-backed venture - sources
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email