PT PP Tbk (IDX: PTPP) interested to acquire PT Krakatau Tirta Industri (KTI), unit of PT Krakatau Steel Tbk (IDX: KRAS) - Photo by KTI

JAKARTA (TheInsiderStories) – PT PP Tbk (IDX: PTPP) interested to acquire PT Krakatau Tirta Industri (KTI), unit of PT Krakatau Steel Tbk (IDX: KRAS), local media reported. Last July, the steel producer announced to divest its non-core assets as part of the company restructuring plans and seeks the funds US$1 billion for debt repayment.

In 1978, Krakatau Steel started an operational support unit to provide clean water. On Feb. 28, 1996, the unit became KTI. Raw water taken from the Cidanau River comes from the natural lake Rawa Dano in Cilegon, Banten. The capacity of electricity installed in the Krenceng Water Treatment Unit is 2,000 liters per second.

Beside PTPP, said the CEO of Krakatau Steel Silmy Karim to the media on Thursday (08/22), he has talks with several companies on the divestment plan. Beside KTI, he added, the company also offered PT Krakatau Bandar Samudera (KBS) and PT Krakatau Daya Listrik (KDL) shares.

While, PTPP’ Finance Director Agus Purbianto admitted that the two were currently negotiating on majority ownership. PTPP wants to have a majority stake in KTI in order to provide good added value.

Previously, PTPP‘ CEO Lukman Hidayat said the company had an ambition to become a big player in the water supply system. The business has a good captive market, he adds.

Beside, KDI, Karim revealed, Krakatau Steel is finalizing the divestment of KDL’ majority shares. The power electricity company, which has been operating since 1996, has five unit power plants with a total installed capacity 400 megawatts.

As of June, KDL’ asset value worth of US$230.57 million and one of the company’ subsidiaries that has recorded profits during first half of this year. Beside manage power plant, KDL also become gas seller partnering with state-owned gas producer, PT Perusahaan Gas Negara (IDX: PGAS).

Krakatau Steel also considered to release other assets, such as hospitals, hotels, industrial land to streamline more than 50 business entities under the group. He expect all the planned to be carried out in the fourth quarter of 2019.

Krakatau Steel also talks with its partners, South Korea’ Pohang Iron and Steel Company (POSCO), Japan’ Nippon Steel and Osaka Steel on the plan. In the midst of mounting debts, the manufacture also has plans to increase capital through a rights issue mechanism in the last quarter in 2019.

At this time, said Karim, his party in the process to get permit from the parliament on the preemptive rights issues program. The manufacturer planned to release 10 percent of the company’ issued and paid up capital. 

“The focus is now on debt and business restructuring, how we can optimize our subsidiaries. The fastest is in the fourth quarter of this year,” he said.

This year, Krakatau Steel planned to run two strategic projects, as part the Indonesian steel producer’ effort to enter downstream business and to reduce the production costs. The first project is the Blast Furnace Complex in the area of 55 hectares joined with Capital Engineering & Research Incorporation Ltd., from China and its unit PT Krakatau Engineering.

In the Blast Furnace complex, KRAS has build Sinter Plant with a capacity 1.7 million tons per year, Hot Metal Treatment Plant with a capacity of 1.2 million tons per annum, and Coke Oven Plant with a capacity of 555 thousand tons in a year. As a support, there is a Raw Material Handling that can accommodate 400,000 tons per year.

Another project, an addition of hot sheet steel capacity to supply Hot Rolled Coil (HRC) with a capacity of 1.5 million tons per annum and is targeted to be complete in April 2019. Karim said, HRC managed to record a sales volume in November 2018 which amount 189,702 tons from previous month 127,005 tons.

Throughout first semester (1H) of 2019, the company’ revenue fell 17.82 percent to Rp9.83 trillion ($692.25 million) from 1H of 2018 worth of Rp 11.96 trillion. The main cause was a significant reduction of steel sales in the domestic market, from $731.37 million to $523.79 million. In addition, the acquisition from the construction engineering business line also dropped 30.86 percent to $ 13.15 million.

US$1: Rp14,200

by Linda Silaen, Email: linda.silaen@theinsiderstories.com