Australia's BHP Steel plans to buy Krakatau Steel shares

JAKARTA (JP): Melbourne-based The Broken Hill Proprietary Company Ltd's (BHP) steel division BHP Steel is considering buying shares in state-owned Krakatau Steel, a company representative said yesterday.

BHP Indonesia president Colin E. Smith told The Jakarta Post: "We had discussed the issue (the purchase of Krakatau Steel) but no agreements had been made."

Bisnis Indonesia, quoting an unidentified source, reported yesterday that the Australian company planned to buy 25 percent of Krakatau Steel through a private placement.

Smith said BHP had not yet decided how many shares it would buy from Krakatau Steel which is Indonesia's largest steel company. Krakatau Steel plans to float its shares on local stock markets later this year.

PT Krakatau Steel said earlier it planned to increase its annual production to 7.5 million tons by 2001 from its present 2.6 million tons.

Krakatau Steel President Soetoro Mangoensoewargo said the expansion program would be financed by the company's planned IPO and bank loans.

BHP Indonesia has four main businesses here -- copper, minerals, petroleum and steel, and support businesses such as engineering, transport and information technology.

BHP operates in the steel sector here through PT BHP Steel Indonesia, which built coating and paint lines at Cilegon, West Java in 1993 for about US$55 million, Smith said.

Smith said his company's relations with Krakatau Steel had been very close since the opening of BHP Steel Indonesia's plant, which is partly owned Yayasan Dana Pensiun of Krakatau Steel and Krakatau Industrial Estate Cilegon.

Krakatau imported iron ore from BHP's operation in Brazil and steel products from its Australian steel plant, he said.

In return, BHP Steel Indonesia bought raw materials to make its steel building and construction products from Krakatau Steel, he said. (hen)