Tuesday, 10 Aug 2010
Channel News Asia reported that China Steel Corporation is studying the feasibility of taking a stake in a Formosa Plastics Group's investment in Vietnam.

Mr LM Chung EVP of CSC said that "We are considering the possibility of investing in FPG's steel plant to be built in Vietnam's Ha Tinh Province. We are looking into whether and how the investment will boost shareholders' value and make CSC more profitable."

Local media reported earlier that day that CSC might take a stake of up to 10% in the plant and that the investment proposal will be submitted to the CSC board of directors for approval later this month, adding that the investment is likely to be finalized by the end of this year at the earliest.

However, Mr Chung declined to disclose the actual size of the stake it is eyeing in FPG plant, which will be capitalized at USD 2.7 billion with a total investment of about USD 80 billion.

He added that "As the FPG investment in Vietnam is huge, CSC is unlikely to hold a large stake should the company decide to go ahead with the investment."

FPG, one of Taiwan's largest conglomerates, owns businesses in various sectors such as petrochemicals, semiconductors and biotechnology. The group has secured approval from the Vietnamese authorities to build the Vietnam steel complex with annual production capacity of 7.5 million tonnes in the first phase of development.

According to news reports, CSC wants to further strengthen its business ties with FPG, as the petrochemical conglomerate has taken a 5% stake in China Steel's USD 600 million cold rolled steel plant that will be built near Vietnam's Ho Chi Minh City.

Mr Chung said that the ties with FPG weigh on the investment consideration to some extent, but reiterated that any investment has to be profitable for CSC.

It may be noted that CSC obtained the green light from Vietnam earlier this year to build the steel plant and the company is aiming to complete construction by the end of 2012, with commercial production scheduled to begin in 2013.