STX Strikes $10 Billion Housing Deal in Ghana

The Korea Times

The Korea Times

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STX Strikes $10 Billion Housing Deal in Ghana

Posted : 2009-12-09 18:36

Updated : 2009-12-09 18:36

Kang Duk-soo, second from left, STX Group chairman, shakes hands with Robert Abongo, Ghanaian minister of water resources, works and housing, after STX won a $10 billion order from the African government to build 200,000 homes there by 2015. The signing ceremony was held at STX’s headquarters in Seoul, Wednesday. / Courtesy of STX Group

By Kim Yoo-chul
Staff Reporter

STX Group has won a $10 billion order from the Ghanaian government to build 200,000 homes in the African country over the next six years.

The massive project involves construction of homes in major cities in Ghana, including its capital Accra from 2010 to 2015, a spokesman of the mid-sized conglomerate that focuses on the shipbuilding, shipping and construction businesses said.

The official said the two sides also signed a deal to launch a joint venture for the project at a ceremony attended by the group Chairman Kang Duk-Soo and Albert Abongo, Ghana's housing minister

The Ghanaian government has been set to offer building lots free of charge and will buy 90,000 units in advance as a back-up plan for the project, according to the official.

He also said Ghana's housing bank called the HFC Bank will guarantee 100 percent housing loans to help individuals who hope to buy the remaining 110,000 units.

The units are initially being built to house low-wage workers and public officials, he said.

"We are delighted at winning the order at a time when major shipbuilding players and even some bigger local builders are struggling to find fresh business momentum amid the industries' deeper downturn," he added.

Good Moves for Cash-Flow?

Analysts and STX officials say the latest deal will help the group strengthen its cash-flow structure despite some skeptical views over the Ghanaian government's pledges.

"The deal will eventually help the group secure further liquidity. But that will only be materialized if the project goes ahead smoothly," Lee Jae-won, an analyst at TongYang Securities, said.

"Many variables still remain to better forecast the deal's effects," according to the analyst.

Officials at the South Korean government and industry watchers say the project has been made in the form of a "package deal," including ways to support Ghana's shipbuilding industry and to develop natural resources there.

"As far as I know, the Ghanaian government may give gold and oil as some part of the payment for the project, while STX Group will offer technological support to help the African country boost the competitiveness of shipbuilding-related industries," a government official said, asking not to be identified.

STX officials, however, declined to comment.

As of the end of the first half of this year, the cash-equivalent assets owned by STX Group came to 3.3 trillion won, while its total debt reached 7.7 trillion won.

Of the total debt, 1.8 trillion won was short-term whose maturity is less than 2 years, data from the nation's financial authorities said.

"It is still premature to say how the deal will impact on the group's cash-flow. But the deal will help," a credit analyst at a local brokerage said, citing the bleak climate in the global shipbuilding industry.

Ghana's housing deficit currently stands at 1 million, officials say. They say the annual national housing requirement is 140,000 units with a current supply of about 45,000 units per year.

The African government is pushing drastic measures to reduce the shortage and urging private housing providers to contribute greatly to the provision of affordable housing units in Ghana.

South Korean builders, which have so far focused on the Middle East and Asia for overseas business, are rushing into sub-Saharan Africa countries to find new opportunities in infrastructure and other construction projects in the region, government officials said.

yckim@koreatimes.co.kr

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