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Nippon steel bets on $11 bln U.S. Steel investment

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Sees profit contribution of 250 billion yen by fiscal 2028

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Detailed investment plan to follow later this year

By Yuka Obayashi, Katya Golubkova and Ritsuko Shimizu

TOKYO, Aug 29 (Reuters) - Japan's Nippon Steel ( NISTF )

plans to increase profit at U.S. Steel through an $11 billion

investment and the transfer of its operational techniques and

advanced technologies to expand capacity and add more high-grade

products, a senior executive said.

Nippon Steel's ( NISTF ) $14.9-billion acquisition of U.S. Steel

closed in June, ending an 18-month process that had been caught

up in the shifting political landscape during the transition

between the Biden and Trump administrations.

The investment, running through 2028, and transfer of

expertise aim to lift U.S. Steel's annual profit contribution to

250 billion yen ($1.70 billion) as early as fiscal 2028, up from

an expected 150 billion yen in 2026 and 80 billion this year.

"Real effects from the investment will appear after 2028,"

Nippon Steel ( NISTF ) Vice Chairman Takahiro Mori told Reuters on

Thursday, adding that profitability could even grow beyond 250

billion yen.

There are plans for a new hot-rolling mill at U.S. Steel's

Mon Valley Works in Pennsylvania, the refurbishment of the No.

14 blast furnace at Gary Works in Indiana, and new

electromagnetic steel sheet lines and other capacity expansions.

"We are looking to build a new mill from the greenfield,"

Mori said, citing options like 3 million metric-ton electric arc

furnaces, similar to the Big River 2 plant in Arkansas.

Mori, the lead negotiator on the deal and now Chairman of

U.S. Steel, said the investment would raise U.S. Steel's

domestic crude steel capacity to around 20 million tons from 17

million.

The acquisition also lifts Nippon Steel's ( NISTF ) global annual

crude steel capacity to 86 million tons, edging closer to its

longer-term 100 million-ton target.

A detailed investment plan will be announced later this year

as part of Nippon Steel's ( NISTF ) new medium-term business strategy.

Nippon Steel ( NISTF ) said in July it would raise 500 billion yen

through a subordinated loan to partially repay a 2 trillion yen

bridging loan that funded the deal.

Mori said the steelmaker also has flexibility with hybrid

financing and may consider convertible and corporate bonds.

"We'll assess the optimal timing, interest rates, and

whether yen or dollar denominations are preferable to pursue the

best financing strategy," he said, adding that equity financing

was possible, but only within limits to avoid shareholder

dilution.

U.S. Steel would fund the $11 billion investment initially,

with Nippon Steel ( NISTF ) stepping in if resources prove insufficient,

Mori said.

He said that U.S. Steel is assessing the impact of an August

explosion at its Clairton plant in Pennsylvania, which could

lower, although not significantly, the expected 80 billion yen

profit contribution to Nippon Steel ( NISTF ) for the current year.

($1 = 147.3300 yen)