Hanwha Ocean Prepares a 2 Trillion Won of ‘Ammunition’ for New Businesses, including Defense

Hanwha Ocean (formerly Daewoo Shipbuilding & Marine Engineering) is preparing to raise funds amounting to around 2 trillion won. This move is proactive investment in defense and other sectors in preparation for the future.

On Aug. 22, Hanwha Ocean announced, “We are reviewing various ways to raise funds for new business investments, including through a rights issue,” and added, “The specific method has not been decided yet.”

It is known that Hanwha Ocean is looking for ways to secure between 2 trillion and 2.5 trillion won. This is equivalent to 25-30% of Hanwha Ocean’s market capitalization, which is around 8 trillion won.

Hanwha Ocean was acquired by Hanwha Group in May. At that time, Hanwha Group participated in a 2 trillion won rights issue of Hanwha Ocean, securing a 49.3% stake and becoming the major shareholder. For Hanwha Ocean, this means moving to secure a large amount of funding just three months after the acquisition.

The company emphasizes that the purpose is to invest in new businesses. Kim Dong-kwan, vice chairman of Hanwha Group, stated at the 13th International Maritime Defense Industry Exhibition (MADEX 2023) in June, “I am confident that Hanwha Ocean, along with Hanwha Aerospace and Hanwha Systems, will create synergies in many areas.” He also mentioned, “We will set long-term strategies and invest heavily to be recognized not only domestically but also abroad.” Vice Chairman Kim’s vision is to transform into the world’s top defense group based on comprehensive land, sea, and air production lines.

Industry insiders believe that additional funds are needed to enhance the competitiveness in the defense business sector. In the future, there will be significant tenders, such as the Korean-style next-generation destroyer (KDDX) and the Canadian submarine project.

Investment in new businesses other than defense is also necessary. Before acquiring Hanwha Ocean, Hanwha Group told its employees about a vision to “secure slots for four Liquefied Natural Gas carriers deliverable by 2027 and two Wind Turbine Installation Vessels at Okpo Shipyard.” Combining the capabilities of Hanwha Group and Hanwha Ocean, they intend to accelerate new ventures in LNG and offshore wind power. With surging global demand for eco-friendly ships, the need to secure development funds is urgent.

In the capital market, there’s speculation that Hanwha Ocean might work on “debt ratio improvement” but the company denies this. The Export-Import Bank of Korea currently holds Hanwha Ocean perpetual convertible bonds worth 2.3 trillion won. From this year, the interest rate of these perpetual bonds is fixed at 1.0% for the next five years. Subsequently, it will be limited to 1.5% until 2034, 2.0% until 2040, and 2.93% thereafter. Given the reasonable interest rate levels, it’s natural for Hanwha Ocean not to rush repayment.