[Aju News DB]
SEOUL, Jan. 17 (Aju News) -- Doosan Heavy Industries & Construction, a key contractor in South Korea's nuclear power industry, is studying the possible separation of its power plant division for disposal due to an uncertain business outlook and liquidity woes, banking sources told Aju News.
Doosan issued a statement on Wednesday, dismissing the potential sale as totally groundless.
Growth in South Korea's nuclear power industry has been led by Doosan Heavy, a Doosan Group subsidiary which builds nuclear power plants, thermal power stations, turbines and generators and desalination plants, and Korea Electric Power Corp., a state utility firm which produces home-made nuclear reactors.
However, Doosan Heavy's profit structure has deteriorated especially since President Moon Jae-in pushed for the policy of phasing out power plants using fossil fuel to accelerate the use of clean and renewable energy.
Officials in private equity funds (PEFs) and investment banks told Aju News that they have held unofficial consultations with top group officials over the potential sale of Doosan Heavy. They said the group's corporate finance project (CFP) team has been in the process of working on the sale, led by group patriarch Park Yong-man.
"The Doosan Group has not officially sent a request for proposal (RFP)," a senior PEF official said, adding the group probably hopes to sell off Doosan Heavy's nuclear and thermal power business.
PEF and investment bank officials the selling price will not be high because of Doosan Heavy's growing debt and poor business performance that made its funding for repayment of borrowings increasingly difficult.
Data from the Financial Supervisory Service showed Doosan Heavy's short-term borrowings rose to 1.79 trillion won (1.68 billion US dollars) at the end of September last year from 987.2 billion won in December 2016, while long-term borrowings decreased to 554.4 billion won from 949.4 billion over the same period.
Doosan Heavy will continue to face the liquidity burden related to the repayment of debts, including corporate bonds estimated at 360 billion won that would mature in the first half of this year. Moreover, the company plans to invest 443.7 billion won this year and 372.3 billion won next year in facility expansion and technology development.
Three major credit rating agencies in South Korea have downgraded Doosan Heavy's credit rating from A- to BBB +, creating another obstacle to the repayment of short-term borrowings. The company's cumulative orders stood at 2.8 trillion won in the third quarter of last year, compared to an average 7.3 trillion won in the past five years.
reporter
Lim Chang-won
cwlim34@ajunews.com
