[Asia Economy Reporter Ki-min Lee] Doosan Heavy Industries & Construction, which has entered restructuring for the first time in five years due to continued business deterioration, plans to make every effort to overcome poor performance this year. The company intends to focus all its efforts on diversifying its business and developing new technologies to overcome its management difficulties.
According to industry sources on the 23rd, Doosan Heavy Industries & Construction has been accepting applications for voluntary retirement from employees aged 45 and older, including technical and office staff, from the 20th of this month until the 4th of next month.
At the board meeting held on the 20th, Doosan Heavy Industries & Construction decided, as part of its self-help plan, to liquidate Doosan IMGB, its Romanian plant, in addition to restructuring. Doosan IMGB, acquired by Doosan Heavy Industries & Construction in 2006, is a casting and forging company producing about 140,000 tons of material annually. This liquidation is a preemptive measure taken due to concerns over declining profitability caused by the stagnation of the power generation and shipbuilding markets.
Doosan Heavy Industries & Construction has recorded net losses for six consecutive years since 2014. Furthermore, excluding affiliates, the operating profit of Doosan Heavy Industries & Construction decreased by 20.1% from 283.4 billion KRW in 2016 to 226.3 billion KRW in 2017, and further declined by 18.4% to 184.6 billion KRW in 2018.
The worsening business conditions are attributed to factors such as the strengthening of environmental regulations and the global energy market trends leading to a contraction in traditional heavy industries like thermal and nuclear power generation and shipbuilding. According to the International Energy Agency (IEA), the scale of new orders for coal-fired power plants, which account for more than 60% of Doosan Heavy Industries & Construction’s orders, shrank from 76 GW in 2013 to 23 GW in 2018, about one-third in five years. Additionally, orders for Middle Eastern power plants and desalination plants sharply declined due to low oil prices, and the factory operation rate in the nuclear power sector dropped to the 50% range last year.
Doosan Heavy Industries & Construction plans to focus not only on maintaining existing orders but also on diversifying its business and developing new technologies aligned with global energy market trends such as gas turbines, wind power, and hydrogen. At the end of last year, Doosan Heavy Industries & Construction signed a contract with Korea Western Power to supply a large power generation gas turbine independently developed for the first time in Korea at the Gimpo combined heat and power plant. Considering the construction of new combined power plants, repowering of aging combined power plants, and coal-fired power plants, the industry expects that the scale of new combined power plant construction requiring gas turbines in Korea will reach about 20 GW by 2030. The government also plans to support the development and commercialization of a Korean-style LNG combined power model through a public-private joint effort in the gas turbine sector.
Doosan Heavy Industries & Construction has also raised its wind power business order target to 400 billion KRW. The amendment to the “Act on Support for Areas Surrounding Power Plants (발주법)” passed the National Assembly in January this year, giving momentum to the government’s “Renewable Energy 3020” policy. The previous act allowed support only for areas within a 5 km radius of power facilities, making it difficult to support areas surrounding offshore wind farms located more than 5 km from land. However, with this amendment, a separate basis for defining areas surrounding offshore wind farms by presidential decree has been established, which is expected to invigorate the wind power business.
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