Perwaja to finish paying off govt loan by end-2012

PERWAJA Holdings Bhd, en route to the main board of Bursa Malaysia, expects to finish paying off a RM250 million government loan by end-2012.

When Kinsteel Bhd bought into Perwaja in September 2006, the latter's major liabilities amounted to RM786 million.

They consisted of RM220 million owed to Alliance Bank Bhd, RM310 million in unpaid electricity bills to Tenaga Nasional Bhd (TNB) and a loan from the government amounting to RM256 million.

Perwaja settled its debt with Alliance Bank in 2006, and TNB last year. At the start of this year, it had started to repay the government loan.

"To date, there is still an outstanding amount of RM250 million. We've started repayment already and, according to the settlement agreement with the government, we should complete the repayment in five years," Perwaja chief executive officer Henry Pheng Chin Guan said.

Perwaja is issuing 150 million shares under the initial public offering (IPO), comprising 60 million new shares and 90 million existing shares to be offered collectively by Kinsteel and Maju Holdings Sdn Bhd.

Of the total shares, 101.5 million will be offered at the discount price of RM2.23 a share. The rest will be priced at RM2.90.

Kinsteel's shareholders are being offered Perwaja shares at RM2.23 apiece. This is a 67 sen, or 23 per cent, discount to the RM2.90 IPO price.

Perwaja is expected to debut on the stock exchange on August 20.

Its mill in Kemaman is the only billet-making factory in the country that makes steel pro-ducts through direct reduction of iron ore (DRI).

Steel made through DRI is known for its strength and used in shipbuilding and construction of bridges and railway lines.

In the DRI process, natural gas is used as an ingredient. It extracts oxygen from molten steel, which increases the purity and, thus, hardness of the steel bars.

Perwaja wants the government to lower the price of gas that it uses as feedstock in the DRI process although it accepts the increase for gas used as fuel.

"This should be differentiated. There should be a better pricing for this portion of natural gas used as feedstock," Pheng said.

The government decided that from July 1 this year until June 30 next year, those using natural gas of more than two million standard cu ft per day would pay a new rate of RM23.88 per unit, from RM11.32 previously.