Efforts In Saving Krakatau Steel, Erick Thohir Negotiates With Posco

SOE Minister Erick Thohir (Photo via bumn.go.id)

JAKARTA - Minister of State-Owned Enterprises (BUMN) Erick Thohir explained that there were several stages of rescuing PT Krakatau Steel (Persero) from jumbo debt bondage. One of them is negotiating with a steel producer from South Korea, Pohang Iron an Steel Company (Posco).

This statement was conveyed by Erick Thohir after meeting with Posco's President Director of Krakatau Kim Kwang Moo and discussing plans for deeper cooperation with Posco at the Ministry of BUMN office, Jakarta, Friday, December 10, 2021.

"Today I had a discussion with the post where I wanted to learn about the beneficial cooperation between the two countries to build an ecosystem rather than national steel. Moreover, we know that we have a large market and we are improving our supply chain," he said in a video conference, Friday, December 10.

Erick admitted that the discussion was very positive. Indonesia and South Korea are moving forward to create mutually beneficial cooperation. According to Erick, Posco has an interest in investing in the electric car industry sector.

“This is something we really want to do to create better stake data for Indonesia,” he said.

Meanwhile, President Director of Krakatau Posco Kim Kwang Moo really appreciates Erick's support. According to him, this meeting was very good with his company.

"Thanks to his support in various aspects to help Posco, Krakatau Steel, and Krakatau Posco, I think this is a good meeting with our company. I want to thank the Minister," said Kim.

Posco, continued Kim, is very interested in the value chain or modernization and the future in Indonesia. Especially Anode and Cathode for the battery.

Kim said Posco is also interested in adding power to its steel capacity. Especially high-end steel for the automotive industry and for household appliances.

"So we are interested in collaborating more with Indonesia in the future," he said.

Krakatau Steel is in danger of going bankrupt

Previously, Erick revealed that the issuer with the stock code KRAS is likely to go bankrupt in the near future. Bankruptcy could occur if the restructuring steps taken by the Ministry of SOEs to resolve the KRAS problem fail to produce results.

"For Krakatau Steel, there are indeed three steps, the problem is that the third step is stuck. Then there were negotiations with Posco, which haven't happened yet. But indeed the one that is currently crucial. If the second failed, the first failed, then this December (KRAS) could default," he said in a working meeting with Commission VI, Thursday, December 2.

Erick said that one of the most difficult aspects of the restructuring of KRAS was renegotiating with Posco. "So far, Krakatau Steel has partnered with Posco. Posco is the majority of us in the minority. Now we are trying to be 50:50, until now there has been no answer from Posco, it's also called a business," he said.

The root cause of the problems at KRAS

The root cause of the problems at KRAS is the stalled blast furnace project worth USD 850 million. The stalled project made KRAS's debt reach 2 billion US dollars.

Since 2019, KRAS has been restructuring its debt worth USD 2.2 billion or approximately IDR 31 trillion. The past debt is allegedly due to acts of corruption.

"Krakatau Steel has a debt of USD 2 billion. One of them is an investment of USD 850 million, which is not good, there must be indications of corruption," he said during the online discussion 'Bangkit Bareng', Tuesday, September 28.

Erick said that the Ministry of SOEs would also investigate the alleged crime. Erick said law enforcement for wrong businesses must be corrected.

"And we will pursue anyone who causes harm. Because this is back, it's not that we want to blame, but law enforcement on business processes that we have corrected," he said.

Jokowi entrusted Krakatau Steel

Previously, when Budi Gunadi Sadikin was still serving as Deputy Minister of State-Owned Enterprises (BUMN) I, he appreciated the achievements made by PT Krakatau Steel (Persero) Tbk in improving its performance. This is evident from the profits obtained in the first quarter of 2020 which grew positively.

Furthermore, Budi said, this steel company is one of the tasks entrusted directly by President Joko Widodo to monitor its performance so that it can improve.

Photo: BPMI Setpres/Muchlis Jr

"Indeed I am very impressed. Krakatau Steel is one of the special tasks that the president gave me when he was appointed (deputy minister) to improve his condition and it has been a problem for a long time," he said, in a virtual discussion, Wednesday, June 24.

According to Budi, Krakatau Steel has shown changes since Silmy Karim was appointed as President Director of this state-owned company. He considered that Silmy's plan to improve in the financial, business, and organizational fields has proven to have a good impact on the company.

"Almost every week there are discussions to ensure that the transformation program can occur with the directors and commissioners of Krakatau Steel. I monitored the update at the beginning of this year Krakatau Steel was able to show significant improvements," he explained.

Budi hopes that in the future Krakatau Steel can maintain its positive performance. Because keeping is more difficult than chasing a positive note.

"It's one thing to fix it but maintaining good things in the future is a more difficult thing. I see that all of Krakatau Steel can get through this pandemic safely, although a little bit, God willing," he said.