Korea Gas Corporation (KOGAS) is selling its share in South East Asia Gas Pipeline (SEAGP) in Myanmar in order to reduce its debts and expand its overseas business.
As KOGAS made such a decision, all eyes are on the next movement of Daewoo International which secures a 25 stake in SEAGP.
According to KOGAS on May 18, the state-owned company recently decided to sell its share in SEAGP and loans to local financial investors. KOGAS currently holds a 4.17 percent stake in SEAGP and its book value reaches 38.3 billion won (US$32.33 million).
It is a lucrative business that makes 3 billion won (US$2.53 million) of the equity method income in KOGAS’ land gas pipes in Myanmar and 500 million won (US$422,119) of related businesses’ profit and loss.
The latest movement has something to do with KOGAS President Lee Seung-hoon’s pragmatic management. KOGAS is seeking to diversify overseas business portfolio while reducing its debts. The debt rate of KOGAS dramatically decreased from 381 percent in 2014 to 321 percent in 2015.
An official from KOGAS said, “The company aimed to cut debts by 2.5 trillion won (US$2.11 billion) last year according to the self-debt reduction plan through business restructuring and sale of assets, but it exceeded the target figure with 3.7 trillion won (US$3.12 billion). The sale of SEAGP stakes is to secure funds needed to recuts debts and expand overseas business in the future.”
SEAGP is a land gas pipe stretching over 2,400 km from Myanmar to China. Gas extracted from the seabed in Myanmar is sold through both underwater and land gas pipelines to CNUOC, an affiliate of the China National Petroleum Corporation (CNPC).
Meanwhile, POSCO tried to sell Daewoo International’s gas field and land gas pipes in Myanmar in a bid to improve its financial structure. However, it decided not to as the gas field and land gas pipes in Myanmar turned a stable profit of 100 billion won (US$84.42 million).
As KOGAS has decided to sell its share in SEAGP to local investors, POSCO is expected to reconsider the sale of Daewoo International’s gas field and land gas pipes in Myanmar, according to industry sources.