Public Investment Fund, Saudi Arabia’s sovereign wealth fund, is forecast to take a big stake in POSCO Engineering & Construction.

“The deal is included in a comprehensive partnership agreed between PIF and POSCO,’’ a company official said on Wednesday. 

Both parties signed a memorandum of understanding to form a joint partnership at a meeting on the sidelines of President Park Geun-hye’s visit to Saudi Arabia with leaders of South Korean businesses.

The deal is valued at around 1.5 trillion won ($1.36 billion), as there is speculation that the steelmaker is seeking to sell a 40 percent stake in its construction arm to raise funds to improve its financial health, capital market watchers said.

The partnership with the state-run fund will reach out to other sectors beyond the construction sector, including the automotive, energy and information and communications technology, the company said.

“Both firms had similar understandings to prepare for the “post-oil era,’’ the steelmaker’s officials said in a statement.

For partnership in the auto sector, Daewoo International, a trading subsidiary of POSCO, agreed with PIF to invest 60 billion won to acquire 15 percent stake in Saudi Arabia’s state-run carmaker that will be established in the near future. If the deal is realized, POSCO will be the third-largest shareholder in the car company.

POSCO officials said the project is part of the MOU but nothing has been confirmed as of yet.

If the deal proceeds as planned, POSCO expects to improve its financial soundness and secure new growth engines from the construction and automobile segments, a goal set by POSCO CEO Kwon Oh-joon since taking office in 2013.

The Saudi Arabian company has recently been seeking to ways to cope with the fast-changing energy industry, POSCO said.

Saudi Arabia is the fourth-largest trading partner of South Korea with the total trade volume between the two countries reaching $46.5 billion in 2013.

By Suk Gee-hyun (monicasuk@heraldcorp.com)