SEOUL, June 24, 2014 (Korea Bizwire) – As POSCO Group acquires Tongyang Power, the company holding the license to build a thermal power plant in Samcheok, Gangwon Province, its energy unit POSCO Energy will be able to earn a stable stream of income from the power generation business.
According to industry sources on June 20, the takeover of Tongyang Power by POSCO Energy will give an important momentum for the whole group to step up its effort to make the energy business one of the future growth engines while improving the group’s financial standing.
On the 18th, POSCO Energy finalized the deal to purchase the 100-percent stake in Tongyang Power at 431.1 billion won. The effective date for the deal was set at August 24. The fact that the transaction price was about 100 billion won more than the level widely expected within the industry reflects the strong willingness of POSCO Group to beef up its energy business.
Up until now, POSCO Energy has strengthened its assets in LNG power generation, wind power, and solar energy. In particular, it has focused mostly on the LNG business that accounts for more than 90 percent of its sales.
The company has a total of six LNG-powered thermal combined-cycle power plants, with an annual capacity of 3,052 megawatts. In addition, it is building three more LNG-fueled power plants in Incheon at the cost of 1,063 billion won.
The reason POSCO Energy has plunged into the coal-based thermal power plant business despite the large assets in LNG power plants has to do with the fact that Tongyang Power’s Samcheok plant would be the last thermal power plant established by a private operator.
Especially given POSCO Energy is the No. 1 LNG-fueled thermal power generator, it will be able to cement its leading position by widening the gap with the runner-up GS Power that recently took over STX Energy.
The Samcheok plant that was scheduled to be built by Tongyang Power is the largest private power generator with an annual capacity of 2,000 megawatts. Tongyang Power had expected to make a sales revenue of 1.5 trillion won and an operating profit of 300 billion won from the plant.
Written by Sean Chung (email@example.com)