JEDDAH — Posco, South Korea's top steelmaker, secured a 1.24 trillion won ($1.08 billion) overseas investment Monday by selling stake in its construction unit to Saudi Arabia‘s sovereign wealth fund. Posco chairman Kwon Oh-joon inked the deal with Public Investment Fund secretary general Abdulrahman al Mofadhi, selling a 38 percent share in Posco Engineering and Construction for 1.2 trillion won, according to the company. Posco added that it will also collaborate with PIF in establishing a Saudi government-run construction firm. The joint venture will build major railroads, hotels and buildings ordered by Saudi Arabia. The company declined to comment as to when the joint venture will be established. The company said “Saudi Arabia has been planning to further develop its manufacturing and industrial infrastructure sectors with PIF as a major agent, in order to respond to the rapidly changing energy and environment markets and has selected Posco as its business partner in recognition of its experiences and competitiveness which has been the base of Korean economic growth.” PIF has $300 billion in assets under management, and was established in 2008 as a sovereign wealth fund, but has since been restructured and is now operated by the Council of Economic Development Affairs. “This occasion, on which Korea and Saudi Arabia opened the future together, was possible due to bilateral exchanges that have lasted more than 1,000 years,” Kwon said during the event held at the main office of Posco E&C in Songdo, Incheon. The development comes amid the firm's struggles to shrug off recent controversies involving its executives allegedly creating slush funds and its clash with Daewoo International over the trading arm-owned gas field in Myanmar. The Saudi state-backed investor initially offered the deal in August, as its country seeks to invest a record amount in public infrastructure projects, such as airports and roads, to stimulate the economy and cut energy dependency. Posco and PIF signed a memorandum of understanding during President Park Geun-hye's visit to the Middle East in March, backed by the South Korean government's support. Analysts had a mixed view on the matter, with some saying it will help streamline the firm's affiliates while others voiced concerns over the construction unit's long-term finances. — SG/Agencies
