Daewoo Shipbuilding & Marine Engineering Co. (DSME) will completely withdraw from wind power business after selling its wind power subsidiary DeWind. The company’s dreams to turn into a global leading company in not only shipbuilding but also wind power sectors are to go up in smoke leaving a loss of some hundreds of billions of won behind.
According to shipbuilding industry sources on January 21, DSME has decided to sell a wind farm in its wind power subsidiary DeWind to a U.S.-based private fund company for 1.5 billion won (US$1.4 million) early this month. The company bought DeWind for 140 billion won (US$131.16 million) in 2009 but now it is able to retrieve only one hundredth of the investment.
DSME is expected to sell other power generation facilities owned by DeWind after the sale as well because the company would think that they have very little market value. Accordingly, DSME’s wind power related affiliates will all be gone.
DSME has decided to sell DeWind because it believes that it can no longer run wind power business operating at a loss contrary to its expectations. In 2008, the wind power generation business was considered as a new future growth engine for domestic shipbuilding companies. The wind power industry benefited most from the former Lee Myung-bak administration’s "low-carbon green growth" initiative and it seemed to be relatively easier for shipbuilding companies that held marine propeller technology to enter. Pushing into the market at that time, DSME said, “We will jump up to be one of the world’s top three wind power facility companies that account for 15 percent of the global market by 2020.”
Unfortunately, its hopes were completely shattered. Since wind power needs a considerable amount of money to install large material and equipment and secure large grounds, government support is vital. However, governments around the world cut their investments in the industry as the global financial crisis slid into the recession. Accordingly, the number of wind power orders naturally dropped off sharply. To top it off, the price of oil, which were skyrocketing, slipped and the growth of new renewable energy demands fell far short of expectations.
After the acquisition, DeWind never got out of the red until now. The company has been recording a loss every year after posting 4.1 billion won (US$3.84 million) in consolidated net loss in 2009, the first year of the acquisition. In particular, its losses went up to 106.1 billion won (US$99.34 million) in 2016. This is why DSME need to sell DeWind.
Hyundai Heavy Industries Co. and Samsung Heavy Industries Co., which joined the wind power market together around the same time, are also forecast to sell related affiliates.