Korea Development Bank (KDB) and the Export-Import Bank of Korea (Korea Eximbank) will provide an additional 1.2 trillion won (some $0.98 billion) to normalize the management of Doosan Heavy Industries & Construction.
KDB and Korea Eximbank held a credit committee and an extended credit committee on June 1, respectively, to approve Doosan Heavy Industries' management normalization plan and decide to provide an additional 1.2 trillion won in support.
The move raised Doosan Heavy Industries' funds received from creditors to a total of 3.6 trillion won ($2.9 billion), adding to the 2.4 trillion won already provided. In March, the two banks provided an additional 800 billion won to Doosan Heavy Industries, following an emergency operation fund of 1 trillion won.
Korea Eximbank also approved the conversion of loans to Doosan Heavy Industries for $500 million in foreign currency bonds and about 586.8 billion won in the Korean currency-denominated bonds.
On May 29, Doosan Heavy Industries promised to carry out a business restructuring aimed at an eco-friendly energy company in the future and asked for additional support at the 23rd Ministerial Meeting on Strengthening Industrial Competitiveness presided over by Deputy Prime Minister and Minister of Strategy and Finance Hong Nam-ki.
In its self-rescue plan, Doosan Heavy Industries proposed gas turbine power generation and new & renewable energy projects, which are eco-friendly, future high value-added projects, as major pillars.
Gas turbine power generation businesses are able to make stable sales due to high demand for parts replacement and maintenance due to its nature. The global gas turbine power market is expected to double by 2035, with the size of the world's gas turbines reaching 97 trillion won as of 2018.
The Korean-style gas turbines, the world's fifth successful independent development last year, are currently undergoing performance tests and will undergo demonstration later.
The self-rescue plan also includes content on new & renewable energy projects. Doosan Heavy Industries plans to expand its existing businesses such as wind power and energy storage systems (ESS), while pushing for eco-friendly hydroelectric power generation projects and solar EPC projects and also entering hydrogen industries such as hydrogen production and liquefied hydrogen.
The sale of its major affiliates and non-core assets is also expected to begin in earnest. Doosan Group has already said it will secure more than 3 trillion won through paid-in capital increase, asset sales and fixed cost reduction.
Although creditors did not specify the sale targets, according to industry sources, negotiations are currently underway to sell organic light-emitting diode (OLED) materials and electric vehicle battery copper foil company Doosan Solus and Doosan Tower.
In addition, Doosan's core units, Industrial Vehicle BG, Electronic BG, Mottrol BG, Doosan Mecatec and Doosan Engineering & Construction, are also believed to be seeking to sell. Golf courses owned by Doosan Heavy Industries, including Club Mow CC, are also expected to be on sale.
Doosan Bears baseball team and Doosan Fuel Cell are said to have been excluded from the sale, and it has yet to be confirmed whether they will sell key affiliates such as Doosan Infracore and Doosan Bobcat.
Until now, creditors have been strongly demanding Doosan Group to sell Doosan Infracore and Doosan Bobcat, but the group has reportedly been reluctant to do so. Doosan Heavy Industries currently holds a 36.27 percent stake in Doosan Infracore and a 51.05 percent stake in Doosan Bobcat.
In addition to the total amount of 4.2 trillion won in loans Doosan Heavy Industries has to repay this year, it also needs to pay for restructuring such as severance pay and expenses for reorganizing and operating the business.
"If Doosan sells all of its key affiliates, the means to earn profits will also disappear, so it cannot rule out the possibility of offering only part of its shares in Infracore, Bobcat and others or offering capital increase to major shareholders," industry experts said.
"The financial structure of Doosan Heavy Industries will improve while implementing the financial structure improvement plan," creditors said. "We will thoroughly check whether Doosan Group and Doosan Heavy Industries implement the management normalization plan and manage it so that it can proceed without a hitch."
