South Korea's largest steelmaker POSCO Group will transfer its liquefied natural gas (LNG) storage business to its power generation affiliate, POSCO Energy Co., in order to reorganize its LNG business structure. The group is planning to increase synergy by transferring its LNG storage facilities to POSCO Energy which has expertise in power generation. POSCO Energy will, in return, spin off its off-gas combined cycle power plants in Pohang and Gwangyang and transfer them to POSCO.
POSCO said in a regulatory filing on April 15 that it will transfer its LNG terminal business unit to its affiliate, POSCO Energy. The agreement includes all the rights, such as assets, debts and business rights. The date of the transfer is set for Sept. 1 and the value of the transfer stands at 608 billion won (US$536.39 million).
POSCO said it is reorganizing the energy business structure to expand its gas business. The group is seeking to create a synergy and advance expertise at the same time by transferring its LNG business to POSCO Energy. Currently, POSCO International Corp. under POSCO Group’s LNG business division is in charge of the “up-stream” sector which explores gas fields and extracts and produces gas. However, the group was unable to create a synergy as it failed to unify the mid-stream” sector which takes charge of transportation and storage. Accordingly, POSCO is planning to reorganize it based on POSCO Energy.
A spokesperson from POSCO Energy said, “We will maximize synergy by connecting with our value chain of the gas business ranging from gas introduction to terminal operation and power plant operation and maintenance. We will not only secure a stable profit but also grow into a total energy firm based on gas infrastructure and generation.”
In return, POSCO Energy will transfer its off-gas combined cycle power plants in Pohang and Gwangyang to POSCO. POSCO Energy will spin off the plants and POSCO will take over them. The merger ratio is set at 1:0.1146. The off-gas combined cycle power plants use excess gases, including hydrogen generated by the steel mill blast furnaces and coke oven, to create electric power.
An official from POSCO said, “The power plants, which are steel-related facilities that supply electric power to steel mills in Pohang and Gwangyang, will be owned by POSCO. The group will be able to integrate its operation system with existing independent power generation facilities. It will also enhance efficiency and raise the stability of electric power supply to steel mills.”