Dec 17 2004
As part of the UK restructuring programme, Teesside’s steel making capacity becomes surplus to the Group’s internal requirements. Teesside Cast Products (“TCP”) has therefore been refocused as a slab exporter and Corus has today signed an agreement with a consortium of re-rolling companies (namely Duferco, Marcegaglia and Imsa; “the Consortium1”) to supply slab under a 10-year off-take contract.
Under this agreement, effective from 2 January, 2005, the Consortium will take, at cost, slab production in 2005 and 2006 that is surplus to Corus’ internal requirements and approximately 74% of output thereafter. The Consortium will pay Corus US$148m, comprising US$69m as an upfront payment in 2005/2006 with a further US$79m in deferred payments over the life of the contract. In addition the Consortium members will contribute approximately 72% of the expected US$100m capital expenditure requirements of TCP to enable identified improvements to be implemented.
In addition to the above companies, Dongkuk Steel Co. have the right to join the Consortium before 5 January 2005.
This agreement provides Corus with significant value reflecting the strength of the existing slab market. It also ensures Corus retains full access to its slab requirements during the UK restructuring programme and furthermore allows the Group to participate in any upside from its retained 26% share of the output thereafter.
Commenting on the announcement, Philippe Varin, Corus’ Chief Executive said: “I am pleased with this agreement. It is in line with our UK restructuring objectives to focus on three steelmaking sites. While providing some US$148m for Corus it also strengthens the position of TCP as a slab producer for the long term. I look forward to a successful relationship with the Consortium members.”
Colin Muncie, Managing Director of Teesside Cast Products said: “This is an excellent outcome. The off-take agreement ensures TCP will enjoy improved future prospects with committed customers and access to funds for future investment. The confidence in TCP shown by the Consortium recognises the potential of the business and the people who work for it.”
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