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| Doosan Group's governance overhaul |
By Nam Hyun-woo
Doosan Group is making strides in reorganizing its portfolio to prioritize future-oriented businesses, casting a rosy outlook on the possibility of the group's fast exit from the state bailout program.
As the power plant and heavy equipment conglomerate has changed its corporate direction to focus on renewable energy and fuel cells, analysts and investors are expressing high hopes that the Doosan companies will play a part in President Moon Jae-in's Korean New Deal initiative, which places an emphasis on hydrogen and other renewable energy industries as key economic growth drivers.
After applying for bailouts from state-run lenders in March to finance its cash-strapped flagship unit Doosan Heavy Industries & Construction, Doosan Group came up with reorganization plans including sales of its assets, an infusion of cash from the owner family's private fortune and rights issued to salvage Doosan Heavy from bankruptcy.
In the past six months, both Korea Development Bank (KDB) and the Export-Import Bank of Korea (Eximbank) have decided to provide direct and indirect support worth 3.6 trillion won to Doosan Heavy, while Doosan Group is believed to have secured 1.5 trillion won in cash and other liquidities, which is half the amount the group pledged to raise in return for the bailout.
When Doosan Heavy manages to sell off its stake in its subsidiary Doosan Infracore, the group's restructuring is anticipated to be completed, and the aspects of its businesses will look far different from the past, analysts said. Doosan Infracore's preliminary bidding will begin on Sept. 22.
Highlighting the shareholding structure and business direction of the new Doosan Group will be Doosan Fuel Cell.
According to sources, Doosan Group's holding firm, Doosan Corp., will hand over its 16.8 percent stake in Doosan Fuel Cell to Doosan Heavy, in return for increasing its stake in Doosan Heavy. Doosan Corp. now has a 44.86 percent stake in Doosan Heavy.
This came after the group announced on Sept. 4 that Doosan Group Chairman Park Jung-won and his family members decided to provide a 23 percent stake ― worth 574 billion won ― to Doosan Heavy for free. This made Doosan Heavy the largest stakeholder of Doosan Fuel Cell.
Following this process, Doosan Group's shareholding structure will become simpler and be more focused on the renewable energy business.
Before the restructuring, the majority of Doosan Group's cash flow was created by Doosan Heavy, which mainly deals in energy equipment, and its subsidiary Doosan Infracore, a heavy construction equipment maker. Doosan Heavy's consolidated assets accounted for approximately 85 percent of Doosan Group as of the end of the first half of this year.
Doosan Heavy's importance in the group will remain the same after the restructuring, but the content of its business will be different.
Upon announcing the stake transfer on Sept. 4, Doosan Group said: "Doosan Heavy will focus on eco-friendly energy businesses, with gas turbines, hydrogen and other renewable energy equipment at its core growth driver."
As Doosan Fuel Cell becomes Doosan Heavy's subsidiary, Doosan Group's shareholding structure will have Doosan Corp. on the top to control Doosan Heavy, which will control Doosan Fuel Cell and other key subsidiaries. And this will redefine Doosan Heavy and Doosan Group's identity as a renewable energy firm.
"Doosan Heavy's portfolio covers various kinds of energy equipment ranging from nuclear, coal fire, natural gas and wind power," Daishin Securities analyst Lee Dong-heon said. "The company is now testing a gas turbine it developed, as well as working on developing an 8 megawatt wind turbine with its experience of establishing a wind power farm in Korea. As it secures Doosan Fuel Cell stakes, Doosan Heavy is able to carry out various fuel cell-related renewable energy businesses, and will remain as a mainstay of the domestic energy market."
Doosan Fuel Cell is garnering keen attention among investors, as it is anticipated to be the one of the biggest beneficiaries of the Moon government's Korean New Deal initiative and increasing demands for fuel cell systems in overseas markets.
Following the Korean New Deal, the company recently increased its 2023 order forecast from 300 megawatt to 580 megawatt, as well as expecting its sales will show a 49 percent compound annual growth rate by then to reach 1.5 trillion won. The company's sales for this year is anticipated to reach 452.3 billion won.
Doosan Fuel Cell enjoyed an 80 percent market share in the domestic power generation fuel cell market in the first quarter of this year.
"With the expansion of renewable energy policies across the world, the growth potential of the fuel cell business is constantly growing, and Doosan Fuel Cell is increasing its fuel cell manufacturing capacity, which is an optimistic direction for the company from both a short-term and long-term perspective."
