Danantara Has Not Approved US$500 Million Capital Injection For Krakatau Steel

Chief Operating Officer (COO) of BPI Danantara Dony Oskaria. (Photo: Mery Handayani/VOI)

TANGERANG - The Danantara Investment Management Agency (BPI) has not yet given the approval of the capital injection proposed by PT Garuda Indonesia (Persero) Tbk worth 500 million US dollars. Because, Danantara is still reviewing the company's business model.

BPI's Chief Operating Officer (COO) Danantara Dony Oskaria said his party was still conducting a study related to the process of restoring Krakatau Steel's business.

According to him, this restructuring cannot only be patched from capital injections.

Tidak bisa cukup dengan uang. Tetapi kita harus melakukan turn around terhadap bisnisnya. Jadi yang kami lakukan itu me-review setiap bisnisnya dulu. Kalau dia sudah masuk ke dalam model yang benar, baru kita tahu berapa kebutuhan finansinya, katanya ditemui di Garuda Sentra Operasi, Tangerang, Banten, Kamis, 13 November.

Dony said there are obligations that must be carried out by the directors of Krakatau Steel to be able to apply for capital injections. For example, cutting costs, and also efficiency.

Furthermore, Dony said that Danantara has full responsibility for the quality of all SOEs, be it in terms of business models, Cost of Sales (HPP) or COGS, EBITDA, to profit margins, whether it can cover operational costs.

"If we can't afford it, it's useless for us to charge it. For example, it's clear that the business is negative, that's what we do. If we give any money, our money will run out, right. So there are requirements, but he first enters the proper business model, then we will calculate. If we need working capital, then we will calculate," he said.

Therefore, Dony requested that Krakatau Steel's management fulfill all requirements for improving the business model first, after that, then submit a capital injection to Danantara.

Similar to Krakatau Steel. We of course before carrying out this process, we asked them to do some of the presyara, especially entering the right modeling. If after we calculate the contribution margin is positive, he is able to close the fixed costs, then we will do it," said Dony.

Previously, PT Krakatau Steel (Persero) Tbk submitted a request for financial support from the Anagata Nusantara Power Investas Management Agency (BPI Danantara) amounting to 500 million US dollars or Rp. 8.29 trillion (assuming an exchange rate of Rp. 16,586 per US dollar).

In the short term, Danantara provided a loan in the form of a Shareholder Loan (PPS) of US$250 million.

Based on the information disclosure of the Indonesia Stock Exchange (IDX), the issuer coded KRAS shares will use the USD 250 million funds for the main operational needs, including the purchase of raw materials in the form of a steel slab for HSM factories, hot rolled coils (HRC) and cold rolled coil full hard (CRC F/H) PT KBI factory, PT KPI steel pipeline HRC, and derivative steel products.

"The use of these funds adjusts the working capital needs according to the cash conversion cycle of each facility," the management wrote, quoted from the IDX's information disclosure, Friday, October 10.

Meanwhile, additional capital of up to 500 million US dollars or Rp8.29 trillion submitted to Danantara will be used for the completion or rescue of the company's restructuring after obtaining an agreement with the banking sector.

Management explained that the fulfillment of raw materials is currently supported by funding from the 3rd party (financier) with a higher rate compared to banking facilities as well as restrictions imposed by each financial player.

"The financing costs are immediately an additional cost of obtaining raw materials," he said.