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Expanding Global Horizon
The power generation company becomes the first Korean company to manage a power company abroad.
Expanding Global Horizon
  • By matthew
  • May 3, 2011, 17:35
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Korea East-West Power signed a contract for a 40% share of Jamaica Public Service Company (JPS) in Kingston, Jamaica on April 5 (local time). Officials of Korea East-West Power met the prime minister of Jamaica and the Jamaican ministers of energy and finance to discuss the management of JPS. JPS ranks sixth in terms of assets in Jamaica and supplies 636.9MW of electric power, approximately 75% of Jamaica's total power generation.

The signing of the contract means Korea East-West Power has a 40% share of JPS, while Marubeni of Japan has 40% and the Jamaican government 20%. The 40% share was valued at US$285 million and means Korea East-West Power will manage JPS with Marubeni of Japan. It is expected that the company will post roughly US$7 billion in sales and US$560 million in net profit until 2027. After 2027, Korea East-West Power can extend the contract on a ten-year basis.

Korea East-West Power will be able to directly participate in the management of JPS beginning July 1. The company is planning to offer technical support such as enhancing the efficiency of the power plant and decreasing power losses during power transfers. Korea East-West Power will be able to create additional profit by enhancing the efficiency of the power plant (29% as of now) and decreasing power loss rate during power transfers (21% as of now). By managing JPS directly, Korea East-West Power expects to offer related Korean companies the opportunities to export their parts and equipment for power distribution and generation, and therefore creating jobs.

This is the first time that a Korean company will manage an overseas utility company with power generation and distribution combined. So it is expected that Jamaica could get the knowhow of management and plant operation transferred from Korea East-West Power. In particular, it is highly likely that the Korea East-West Power-led consortium will win an order to build a new combined cycle power plant. If the Korea East-West Power-led consortium comes to participate in construction of the new complex power plant (360 MW) in July, Korea East-West Power will be able to create opportunities to secure additional profits and export domestic materials.

Furthermore, the project will pave the way for Korea East-West Power to expand into Latin American by combining projects in Haiti and Chile with the one in Jamaica. Last year, Korea East-West Power accomplished big feats, such as securing managerial rights for a diesel power plant in Guam in January and four power plants in the U.S. Korea East-West Power is a successful example of Korean power generation companies' making a foray into overseas markets, operating nine businesses in seven countries including the Philippines, Chile and Haiti, as well as developing 18 projects in 15 countries as of March, 2011.

Korea East-West Power did not engage in overseas business before the inauguration of Lee Gil-gu in October, 2008. However, the company posted 5.17 billion won and 17.8 billion won in overseas sales in 2009 and 2010, respectively. This year, the company is expected to post 500 billion won in overseas sales, 10% of its total sales. In the meantime, Korea East-West Power recently revealed “Global Top 10 Energy Company,” its new vision to grow into one of the world's 10 biggest energy companies by posting 14 trillion won in sales in 2020

“This project is a good opportunity to promote the brand of Korea internationally and expand Korea's economic territories by increasing the value of Korea through electric power sales, to say nothing of generating profits,” said Lee Gil-gu, president and CEO of Korea East-West Power “The project will have a big impact on the Korean economy as a high-value-added project because the project supplies Korean-made parts and equipment and Korean human resources in the Engineering, Procurement, Construction (EPC) sector.”

“In addition, the Korean power generation industry’s advancement into overseas markets offers opportunities not only to power generation companies but also other companies in Korea. Therefore,

this is a good win-win partnership model,” Lee added.