Exclusive: South Korean Steel Giant POSCO Ponders Exiting Myanmar Army-Backed Venture

© Reuters.

© Reuters. The POSCO logo is seen at the company’s headquarters in Seoul.

By Cynthia Kim SEOUL (Reuters) – South Korean steel giant POSCO (NYSE 🙂 has begun to review how it could end a joint venture with an army-controlled company in Myanmar in the wake of the coup in February, two people with the first – firsthand knowledge of the matter, he told Reuters. As Myanmar’s military rulers continue a deadly crackdown on protests, killing hundreds, people said the C&C POSCO branch of the Korean parent is considering selling its 70% stake in the company to Myanmar Economic Holdings Ltd ( MEHL) or buy your partner’s. bet. It was not immediately clear how much the 30% stake would be worth. The internal discussions come amid increasing scrutiny by shareholders and rights activists over international companies that still operate associations in Myanmar. Companies from Australia’s Woodside (OTC 🙂 Petroleum and Japanese beverage giant Kirin Holdings are among those that have already shut down. MEHL is among Myanmar’s military entities recently sanctioned by the United States and Britain. POSCO C&C has repeatedly said that it has paid no dividends to MEHL since the 2017 Rohingya crisis sparked international criticism of the Myanmar military. But people with knowledge of the matter say POSCO is wary of an abrupt exit from steel because it could jeopardize hundreds of millions of dollars raised from more lucrative gas projects jointly operated with another Myanmar state-owned company by an affiliate, Posco International. “We don’t want to run the business the way we do now, and we are reviewing the restructuring of 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 does not mean that we are rushing to make a decision, but two options that could come up include selling our stake or buying their (MEHL) stake.” POSCO C&C previously said that its business would not be affected by penalties and that it will only take action if it discovers that MEHL is directly involved in the coup. MEHL did not respond to Reuters’ request for comment. “BIG PAINS” POSCO’s profits from the Myanmar steel business, about 2 billion won (US $ 1.77 million) last year, are dwarfed by profits from Myanmar’s gas projects. About two-thirds of operating profit at Posco International came from the latter last year, about 300 billion won ($ 265.5 million), in partnership with local state energy company Myanmar Oil and Gas Enterprise (MOGE). . “Relatively speaking, (the) sheet steel business is not making much money. And its ownership structure is much simpler than some of POSCO’s other businesses in Myanmar,” said the company’s second source. “But if we go out, it would be important to say ‘goodbye’ in good terms.” Total of France and US-based Chevron (NYSE 🙂 have also worked for decades with MOGE, which has yet to come under sanctions, although the UN human rights investigator called for coordinated sanctions last month. Going out of steel instead of gas would also be easier due to a more complex ownership structure at the latter company, the sources said. While Posco International controls the gas projects through its 51% stake, India Oil and Corp (ONGC) and GAIL own 17% and 8.5% stakes, respectively. GROWING PRESSURE International pressure against the military and companies linked to it has steadily increased since February, with a death toll close to 550 in the two months since generals toppled the elected government of Aung San Suu Kyi. Shin Mee-jee of South Korea’s People’s Solidarity for Participatory Democracy was one of the lobbyists who said the country’s huge national pension fund, the National Pension Service (NPS), should put pressure on POSCO to cut ties with the Myanmar military. NPS is POSCO’s largest shareholder, with an 11.1% stake worth $ 2.42 billion, and the third-largest pension fund in the world overall with nearly $ 1 trillion in assets. “What nonsense, to see our taxpayers’ money funneled to kill the people of Myanmar through the (pension) … The government should also be more responsible about where the money from the pension fund goes,” he said. Shin. 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 showing increased interest in POSCO’s plans for Myanmar. Sweden’s public pension fund, which owns POSCO shares, told Reuters it questioned the company about its investments in Myanmar as it is concerned about human rights issues in the country. Meanwhile, Nordic investor Nordea told the Swedish branch of the Fair Finance network, started by Oxfam, that it had put POSCO “in quarantine until further notice” regarding its plans for Myanmar. ($ 1 = 1,128.6400 won)