POSCO weighing options to exit Myanmar military controlled joint venture

In a significant development, South Korean steelmaker POSCO has begun reviewing how it might terminate its joint venture with a company controlled by the military in Myanmar, in the wake of the military coup there in February, said two sources with first-hand knowledge of the matter at hand.

Myanmar’s army continues its deadly crackdown on protest which saw the death of hundreds of people, said sources.

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, said sources. It is not clear what would be the worth of the 30% holding.

The development comes midst growing scrutiny from shareholders and rights activists on international businesses still operating partnerships in Myanmar, with companies from Australia, including Woodside Petroleum and Japan, such as Kirin Holdings, among those who have already pulled out of the country.

MEHL is among Myanmar military entities which has recently been 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.

According to sources with knowledge of the matter, POSCO is wary of an abrupt exit since it could potentially jeopardize hundreds of millions of dollars earned from 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,” said one of the two sources with knowledge of the discussions.

Sources preferred the cover of anonymity 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,” said sources.

In the previous year, POSCO’s profits from Myanmar’s steel business came to around $1.77 million (~2 billion won); these are dwarfed by earnings from Myanmar gas projects. Around two thirds of the operating profit at Posco International, around $265.5 million (300 billion won) came from this latter source.

“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,” said a second source at the company. “But if we exit, it would be important to say ‘bye’ on good terms.” “Exiting steel rather than gas would also be simpler due to a more complex ownership structure in the latter venture,” said sources.

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