At least we can breathe now
Krakatau Steel CEO Silmy Karim/ Antara/Asep Fathulrahman
IN one year and four months, Krakatau Steel pushed to restructure debts that have been weighing the company’s finances down. The state-owned enterprise (SOE) now prepares for follow-up corporate actions.
The company CEO Silmy Karim looked happier. A debt of some US$2 billion—roughly Rp30 trillion—in Krakatau Steel’s (IDX: KRAS) ledger, is slowly—but surely being paid. The company, which he has been leading since 2018, also gets a low interest rate after they got a restructuring deal with a number of banks. “At least we can breathe now. Back then, this is how high the water was,” he said with his hand up to his nose, mimicking the movements of a drowning person.
But Silmy’s work is not done yet. In an interview with Tempo’s Putri Adityowati and Vindry Florentin on January 28, the 46-year-old shared his company’s upcoming strategies.
The debt restructuring agreement with four remaining lenders was finalized in two months. Did you speed things up on purpose?
We did that because each deputy of the SOEs minister now has a portfolio. We hold coordination meetings every week, so that many problems could be solved within 100 days. We have to complete it in three months because it would be included in the key performance index. The thing with debts is that it is difficult because of the large amount. If we mistreat it, causing interference in the collection, there would be an asset impairment. This is where we have to discuss things well, to create a win-win solution.
If combined, the restructuring scheme with a total of 10 banks would have required more than a year to finalize. How did you finish it?
It’s all thanks to negotiations and the support from the Financial Services Authority (OJK). There were no issues, really. “Please help us sort out Krakatau Steel,” that’s all. If we perform well, we can pay up immediately. We are also going to sell some assets. For now, it would be assets that are no longer productive. And then we will continue with profitable an unrelated assets, and then non-profitable but related. Profitable assets that are related to our business would not be sold. (The profits) can be used to pay debt installments.
What schemes are you preparing to sell subsidiaries?
We are reviewing many schemes so we can select one that offers the most value. We would decide what is best. We can look for strategic partners, hold IPO (initial public offering), or synergize with other SOEs. We might also consider selling to banks. If they are willing to pay good money, why not?
What about the development of the Krakatau-Posco 10-million tons cluster?
To be honest, the biggest investment in Indonesia comes from Posco, worth about US$3.5 billion. It is of our interest to ensure that Posco will get its investment back, otherwise Indonesia would have a bad image for non-profiting investments—despite increasing demand every year and high import surges. Posco is planning to raise production until 10 million tons from today’s 3 million. This means they need more. Meanwhile, out blast furnace project is not producing, increased to 5 million.
Is that why you went to Korea? For lobbying purposes?
We went to Korea to talk with Korea Eximbank so they would continue to support Krakatau Posco’s loan. We told them that we have completed the debt restructuring process.
Once completed, what about the old plan to have Krakatau join the mining holding?
To join the holding you have to generate profits. I think, “okay” if our finances are positive in 2020, which is the case for this January. Holding is another issues. To have positive finances we have to give it a semester or two, so that the (process) won’t interfere with other (plans). So it would be best if we finish prior projects first.
Have you solved the blast furnace project’s inflated investment issue?
I stopped it on December 5. The Development Finance Comptroller (BPKP) and KPMG Global have released their audits and the conclusion was that the project had to be shut down. We have to replace the end-point, so it would not go through the old facility—using a new one instead that will not use gas 100 percent.
What did the audit found?
Firstly, this is a stalled project that must be completed. The management has made efforts to finish it, and then operate it to prove whether the feasibility test results were correct. As it turned out, operating costs were high. We measured how much steel could be produced. Now, if the price per ton is more expensive at US$100 to US$120, you cannot compete. So then I stopped it.