SEOUL, KOREA - POSCO Group has signed an agreement to purchase Tongyang Power while in effect giving up the bid to acquire the Dongbu Incheon Steel plant and Dongbu Power's Dangjin plant. On June 18, POSCO Energy agreed to take over the 100-percent stake in Tongyang Power, the company holding the license to build a thermal power plant in Samcheok, Gangwon Province, at 431.1 billion won.

 

An investment banker commented, "The second highest bidder after POSCO Energy offered the price of about 300 billion won." That means the price  differential was as much as 130 billion won. To this, a POSCO official answered, "Most industry people think the Dangjin plant had locational advantage than the Samcheok plant. But that's far from the truth. The Dangjin plant seems to be well located given it is only 2 kilometers away from the nearest substation. But Korea Electric Power Corporation asked us to build power transmission lines along the 35-km interval, which may trigger so many lawsuits as the area is densely populated."

 

In contrast, he added, Tongyang Power's Samcheok plant takes longer transmission lines but most of the areas are covered with state-owned forest lands, which are unlikely to cause any civil suits.

 

As for the price, the same official said, "The Dangjin plant is acquiring a 60-percent stake in a company with a capacity of 1,200 megawatts. But Tongyang Power is buying the 100-percent stake in a company with a capacity of 2,000 megawatts." However, a Dongbu Group official countered, "There is little possibility of civil lawsuits because we have signed agreements from the residents in the area."