Corus To Sell Its loss making

Teesside Biz

Thai SSI presenting its mettle to acquire for $500 MN

 Corus To Consider Mothballing
• Jan 2005 - 10 yr binding Offtake Agreement with Four Overseas re-rollers for
selling about 78% of TCP output at cost of production.

• April 2007 - Tata Steel buys Corus

• Nov 2008 - Having made an estimated $800 mn out of the Offtake Agreement in
its 1st few years, the consortium asks Corus to mothball TCP. Corus refuses, but
agrees to reduce production by 30%.

• April 2009 - Consortium unilaterally goes back on the Offtake Agreement .Corus
mulls over mothballing considering it necessary.

• Feb 19, 2010 - TCP partial mothballing process begins (in Agreement between the
Steel Unions & Corus)
Corus To Sell Teesside Biz to Thai SSI for $500M

The Deal

• Sahaviriya Steel Industries Public Company Limited (SSI), Thailand’s largest steel
producer & Corus UK Ltd have signed a Memorandum of Understanding (MoU).

• The assets covered by the MoU include the Redcar and South Bank coke ovens,
TCP’s power generation facilities and sinter plant, the Redcar Blast Furnace and
the Lackenby Steelmaking facilities.

• A sale agreement would also result in Corus and SSI operating Redcar Wharf (TCP’s
bulk terminal) as a joint venture, giving Corus the flexibility to use Teesside to
serve its other steelmaking operations, while also meeting SSI’s requirements on
Teesside.
Corus To Sell Teesside Biz to Thai SSI for $500M

Advantages

• Create a significant number of new jobs.

• The restart of steelmaking on Teesside (post-mothballing).

• Will enable SSI becoming a fully integrated steel producer with both primary
steelmaking and rolling facilities.

• Gordon Brown's government pledged £60 million to help Teesside recover from
the mothballing.

• Losses to Tata’s: losses at TCP, from April 2009 to December had reached £150m
and grew further, which became unsustainable
Corus To Sell Teesside Biz to Thai SSI for $500M

STEEL INDUSTRY WOES CAN BE RESOLVED BY:

• Bring forward infrastructure projects, which stimulate steel demand

• Improve access to trade credit insurance, especially for steel consumers

• Intervene in relation to energy costs and security of energy supply

• Apply pressure on the banks to increase lending

Corus To Sell Teesside Biz to Thai SSI for $500M

Disadvantages & Requirements :

• TCP has a capacity to produce more than 3 million tonnes a year of slab, a semi-
finished product that can only be sold to other steelmakers that have more rolling
than melting capacity. 

• TCP is a low-margin conversion business, importing raw materials from as far

away as Australia, which are then re-exported as slab, mostly to South East Asia.

• A Strategic Partner for TCP needs to have serious financial muscle, sufficient to
take on a business whose turnover can be as high as £2 billion and whose working
capital requirements are also massive.

• International slab demand collapsed

Corus To Sell Teesside Biz to Thai SSI for $500M

IF THE DEAL GOES THROUGH:

• SSI has a well-earned reputation that should reassure the community that
steelmaking is at the top of their agenda.

• While the reaction to the MoU was overwhelmingly positive, SSI is still a long way
from being able to sign a final sale purchase agreement for TCP. 

• The company has not yet arranged financing for its $500 million bid, and, since
signing the deal, SSI has faced scepticism from the financial community in
Thailand. It’s still not clear how the reroller plans to raise the funds as the
transaction value of $500 million — with an additional $100 million a year needed
as working capital for plant maintenance — is on the high side for SSI.