By Cynthia Kim
SEOUL (Reuters) – Giant South Korea steelmaker POSCO (NYSE:) 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:) 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.
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.”
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