FRANKFURT: Thyssenkrupp’s steel division requires around €1.3bil or about US$1.4bil in additional funds beyond what its parent is prepared to pay in a planned separation process, the division’s supervisory board chairman says.

Sigmar Gabriel, who spoke after a supervisory board meeting of Thyssenkrupp Steel Europe (TKSE), said an external audit would now be carried out to determine the unit’s restructuring and funding needs, adding that this could happen before year-end.

The sale of TKSE, which is closely tied to Germany’s history as an industrial heavyweight, has been fraught with difficulties for years, mostly due the fact that the business needs billions of euros to keep investing and regain competitiveness.

Gabriel added that the board would reconvene on Aug 29 to continue its discussions and that last Friday’s meeting only marked one step towards a separation of TKSE from Thyssenkrupp AG, efforts that have failed several times in recent years.

The meeting was also attended by Czech billionaire Daniel Kretinsky, who last week closed a deal to buy 20% of TKSE and is in talks to buy a further 30% to eventually form a 50:50 steel joint venture with Thyssenkrupp.

Gabriel said there has been no agreement between the steel unit’s management and the division’s owners about how the funding gap could be closed, and if it even was that big, adding the planned external audit was meant to bring clarity.

“This will not be an official ruling that everyone will then have to abide by, but rather, if you like, a neutral assessment by auditors, on the basis of which we will hopefully come to an agreement,” Gabriel said.

A past review of consultancy Roland Berger had even arrived at a bigger funding gap than the €1.3bil, he added.

Gabriel said TKSE and Thyssenkrupp AG had agreed to strike an interim funding agreement for the next 24 months to ensure the steel division’s operations beyond the end of September, which is when a domination agreement between both sides ends.

That agreement is to be specified by Aug 20 to make sure it can be approved at the board’s meeting a week later, Gabriel said, adding the aim was to ensure the solvency of TKSE at all times.

“This should put an end to the current public speculation about an alleged threat of insolvency,” he told reporters.

Overall, there is disagreement between TKSE and its owners over whether a business plan discussed last Friday and including plans for a sale of steel joint venture HKM, goes far enough.

A sale of HKM, in which TKSE owns 50%, could help the unit achieve two million tonnes in annual capacity cuts. Gabriel said that if a sale should fail TKSE would enter talks with HKM’s co-owners Salzgitter (30%) and Vallourec (20%) over a closure of the business.

 - Reuters