Why Doosan Enerbility wants to spin off Doosan Bobcat, its 'cash cow'

[Korea Financial Times, Shin Haeju] Doosan Enerbility (CEO and Chairman Park Ji-won) is eyeing the European nuclear power market. The keystone will probably be the Czech nuclear power plant order. Doosan needs to secure that bridgehead, and its subsidiary Doosan Bobcat is the problem.

Doosan Enerbility is in the odd position of having to spin off a key subsidiary, Doosan Bobcat, in order to borrow KRW 700 billion to capitalize on the “unprecedented business opportunity” of the nuclear power boom. Doosan Bobcat accounted for more than half of Doosan Enerbility's consolidated sales of KRW 8.25 trillion in the 1st half of this year. Why would Doosan Enerbility need to spin off such a strong subsidiary?

Doosan Enerbility could earn KRW 8 trillion, or about 33% of the total KRW 24 trillion, if the KHNP-led Czech nuclear project is ultimately awarded. In addition to the Czech Republic, the company is also expected to win a total of 10 orders in the United Arab Emirates (UAE), the United Kingdom, and Sweden over the next five years. In Korea, the company has secured two projects with the restart of Shin-Hanul Units 3 and 4.
In addition, in the case of "small modular nuclear power plants (SMR)," which are being intensively fostered as future growth engines, they have secured an opportunity to participate in Romania's SMR construction project led by NuScale Power of USA. In July, it obtained certification from the Romanian Nuclear Regulatory Agency (CNCAN) for the design and production of large-scale Romanian nuclear power plants and SMR equipment.

In order for Doosan Enerbility which has a further opportunity to win orders, to successfully carry out all these projects, cash and additional borrowings must be supported. The company is pushing for a "division" of its subsidiary Doosan Bobcat in order to proceed with such a financing plan without a hitch. This is because it can shake off 720 billion won in Doosan Bobcat borrowings.

The amount occurred when Doosan Enerbility sold Doosan Infracore (now HD Hyundai Infracore) in the past. At that time, Doosan Infracore was divided into a business company and a holding company, with the business company becoming HD Hyundai Infracore and the holding company with Bobcat being merged into Doosan Energy as a subsidiary. At this time, 720 billion won of the loans Doosan Heavy Industries & Construction paid to acquire Doosan Bobcat are maintained through refinancing.

Of course, despite the debt burden of Doosan Bobcat, Doosan Enerbility has no problem raising external funds. However, it is understood that the borrowing conditions will be much better once the subsidiary is organized, as financial indicators such as Doosan Enerbility's dependence on borrowings and interest coverage ratio (the amount of operating income that goes to interest expense) will improve.

Earlier, Park Sang-hyun, CEO of Doosan Enerbility, said in a shareholder letter last month, "Business restructuring is a good way to secure financial resources for growth in a timely manner."



Doosan Enerbility is currently working hard to win the Czech nuclear power plant order. Team Korea, a joint venture between Doosan and Korea Hydro & Nuclear Power(KHNP), has been selected as the preferred bidder for the Czech nuclear power plant.

On the 19th, Doosan Group Chairman Park Jung-won and Vice Chairman Park Ji-won traveled to the Czech Republic as part of an economic mission to accompany President Yun Suk-yul. The following day, on the 20th, they attended the "Korea-Czech Nuclear Power Plant Cooperation Agreement Ceremony" held at Doosan Skoda Power, a local subsidiary of Doosan Enerbility in Plzen, Czech Republic. The ceremony was attended by President Yun, Minister of Trade, Industry and Energy Ahn Deok-geun, President and CEO of KHNP, Hwang Ju-ho, and Czech Prime Minister Petr Fiala.

Prior to the signing ceremony, Chairman Park held a Doosan Partnership Day in the Czech Republic in May to support the company's bid for the Czech nuclear power plant. He also visited Doosan Skoda Power's production site and Doosan Bobcat's EMEA operations. Doosan Enerbility signed a memorandum of understanding (MOU) with local power generation equipment companies to cooperate in supplying main and auxiliary equipment for nuclear power plants.
At the time, Chairman Park Jung-won emphasized, “Based on our experience in successfully supplying cycles to the Barakah Nuclear Power Plant in the UAE, our first overseas export, we will do our best to win orders for overseas nuclear power plants, which we are challenging again after 15 years.”

Shin Haeju (hjs0509@fntimes.com)