Gyeongnam Province Again Opposes Sale of SK Ocean Plant ... "Must Fulfill Corporate Social Responsibility"

Gyeongnam Province has once again expressed its opposition to the planned sale of shares in SK Ocean Plant, the project operator of the Yangchon and Yongjeong Opportunity Development Zone in Donghae-myeon, Goseong County.

On November 17, the provincial government held a press conference at the provincial office press center and announced, "We express our opposition to SK Ecoplant selling its subsidiary SK Ocean Plant to the private equity fund consortium led by The Ocean Asset Management."

Kim Myungjoo, Deputy Governor for Economic Affairs of Gyeongnam Province, is expressing Gyeongnam Province's opposition to SK Ocean Plant, the project operator of the Yangchon and Yongjeong Opportunity Development Zone in Donghae-myeon, Goseong County, pursuing the sale of its shares. Photo by Lee Seryung

Kim Myungjoo, Deputy Governor for Economic Affairs of Gyeongnam Province, pointed out, "If the sale is made to a private equity fund that lacks proven capital-raising capabilities and has no experience in offshore wind or shipbuilding, there is a high risk of setbacks, such as changes or cancellations to the Opportunity Development Zone designation, which currently has a 60% completion rate and requires an additional investment of 500 billion KRW."

He also stated, "Withdrawing from the offshore wind power business, regardless of the reason, runs counter to the government's policy of promoting renewable energy. There is a high possibility that the nationally promoted offshore wind power business could be taken over by foreign companies. If we become dependent on foreign companies for the substructures, which are the core of the offshore wind power business, it will have a serious impact on energy security and inevitably hand over a market worth tens of trillions of KRW to foreign interests."

Given the nature of private equity funds, which prioritize returns, there are concerns that after the sale, the succession of employment for current workers and the maintenance of contracts with partner companies may become uncertain. There is also the risk that the fund may neglect the offshore wind power business if it deems it insufficiently profitable.

Deputy Governor Kim stated, "Gyeongnam Province and Goseong County trusted SK Ocean Plant's long-term investment plans and not only provided the necessary administrative and financial support but also worked to have the area designated as an Opportunity Development Zone. A unilateral sale decision without prior consultation is not the attitude expected from SK, which claims to prioritize ESG management."

He added, "While investment in a specific industry or the sale of shares is within the autonomous domain of companies and their managerial freedom should be respected, in cases where a business has been conducted with significant sacrifices from the local community and full administrative support, at the very least, there should be prior consultation with local residents and the community."

Offshore wind turbine substructure manufactured at the SK Ocean Plant yard located in Goseong-gun, Gyeongnam. Provided by SK Ocean Plant

According to Gyeongnam Province, as a defense industry company, SK Ocean Plant must obtain approval for the sale from both the Minister of Trade, Industry and Energy and the Administrator of the Defense Acquisition Program Administration, in accordance with relevant laws.

Furthermore, as the project operator of the Yangchon and Yongjeong Industrial Complex Opportunity Development Zone, any sale would constitute a change in the project operator for the special zone, requiring approval after review by the Local Industrial Complex Review Committee.

Deputy Governor Kim emphasized, "If the sale proceeds as planned, we will thoroughly verify the private equity fund's capital-raising plans, operational capabilities, and defense industry qualifications. Even if the buyer is a large corporation rather than a newly established private equity fund, the same rigorous verification will apply."

He also stated that the province plans to push for amendments to the Offshore Wind Power Act, which would mandate that at least half of the equipment used in offshore wind power substructure orders be domestically produced, to ensure stable future orders for offshore wind substructures.

Deputy Governor Kim stressed, "The sale of SK Ocean Plant is not a simple transaction between companies, but a matter of critical importance directly linked to the competitiveness of the regional shipbuilding industry and the future growth engines of our country, such as offshore wind power. SK Ecoplant should return to its original intentions at the time of acquiring SK Ocean Plant three years ago and fulfill its corporate social responsibility for the development of Korea's offshore wind power industry and the local community."

Gyeongnam Province has officially opposed the sale of SK Ocean Plant through joint press conferences with Goseong County and responses to urgent issues at the provincial assembly. The province has also communicated its opposition to SK Ocean Plant, SK Group, and the preferred negotiating party for the sale, highlighting the difficulties in maintaining existing defense industry operations and the Opportunity Development Zone designation if the sale goes ahead.

SK Ocean Plant, a specialized company in offshore wind, shipbuilding, and marine industries in the province, is currently investing 1 trillion KRW to build the world’s largest offshore wind substructure production base in the Yangchon and Yongjeong General Industrial Complex in Donghae-myeon, Goseong County.

The site for the specialized offshore wind production base was designated as the first Opportunity Development Zone in Gyeongnam Province in June of this year.

Gyeongnam Province and Goseong County have actively supported the project by easing regulations such as lifting the fisheries resource protection zone and approving forest land conversions, as well as expanding and improving National Route 77, constructing access roads to the special zone, implementing job-linked housing projects, and providing various permits and approvals.

However, SK Ecoplant, the parent company, moved to sell its stake just three years after acquiring Samkang M&T and renaming it SK Ocean Plant, and in September announced that it had selected 'The Ocean Consortium', a newly established private equity fund (PEF) manager founded last year, as the preferred negotiating party for the share sale.