Posco secures $1.2 billion loan to build RI steel plant

South Korean steel company Pohang Iron and Steel Company (Posco), the third largest steel producer in the world, has secured loans worth up to US$1.2 billion to finance the construction of the company?s integrated steel plant in Indonesia, Investor Daily reported.

The new steel plant will be built in Cilegon, Banten by PT Krakatau Posco, a joint venture between the South Korean company and state owned steel company PT Krakatau Steel (KS). The joint venture will need at least $6 billion to finance the construction of the plant which is expected to begin commercial operation in 2013 with a capacity of 3 million tons a year.

Posco said that about $1.2 billion of the loan will be provided by Eximbank of South Korea and the remainders will be provided by Korea Trade Insurance Corp and three other banks including Sumitomo Mitsui Banking Corp in the form of payment guarantees.

Posco has a 70 percent stake in the joint venture and KS holds other 30 percent. Posco has earlier injected about $931 million for the steel project.

KS President Director Fazwar Bujang said that the initial investment for the construction of the steel plant would reach a total of 2.7 billion. About 35 percent of the total will be provided by Posco and KS, and the other 65 percent from bank loans which will be obtained by Posco. (*)