Hyundai E&C’s Growth Momentum Expected to Continue
The authors are analysts of NH Investment & Securities. They can be reached at minjae.lee@nhqv.com and ys.jung@nhqv.com, respectively. -- Ed.
In the wind farm EPCI market, entry barriers are being formed for companies possessing proven track records and the related installation equipment. As a leader in the domestic large-scale offshore wind power project market, Hyundai E&C’s growth momentum is expected to continue over the mid/long term.
DEME Group boasts strong relationship with Orsted
The Dredging, Environmental, and Marine Engineering (DEME) Group is an international group of specialist firms that not only install offshore wind farms, but also engage in port construction, environmental restoration, and oil/gas extraction/distribution. With regard to offshore wind farm projects, the group is in charge of the engineering, procurement, construction, and installation (EPCI) of power generation turbines, substructures, offshore substations, and submarine cables. DEME owns 2 offshore wind power installation ships with a capacity of 35,000 tons each, 6 jack-up offshore wind farm installation ships with capacities of 2,000~8,000 tons, and 1 submarine cable installation ship (capacity of 10,000 tons).
DEME’s 2020 sales and EBITDA margin came to EUR2.19bn (-16% y-y) and 16.8% (+0.1%p y-y), respectively. By business, the offshore wind power business accounted for 43% of sales, and by region, Europe made up 77% of the group’s top line. DEME is undertaking EPCI for several major offshore wind farm projects. In detail, the group is installing 94 substructures for the Borssele 1 & 2 projects in the Netherlands (Orsted; 752MW), 650km of internal power grid cables for the UK Dogger Bank project (SSE and Equinor; 3.6GW), 102 wind turbines for the East Anglia ONE project (Orsted; 714MW), and 165 substructures for the Hornsea 2 project (Orsted; 1.4GW).
Hyundai E&C has accumulated project experience with KEPCO
Together with 100%-owned subsidiary Hyundai Engineering & Steel Industries, Hyundai E&C is constructing 20 offshore wind farm substructures for the Southwest Sea Wind Power Demonstration Complex Phase 1 project (60 MW) and 9 substructures for the Tamla Offshore Wind Power Demonstration Complex project (30 MW). Hyundai Engineering & Steel Industries has already won orders for 28 substructures for the Greater Changhua Offshore Wind Farm project in Taiwan. In addition, it has secured the right to operate an offshore wind farm through investment in the Hallym Offshore Wind Farm project (100MW). For reference, the total project cost for the Hallym farm is W0.5tn, and 18 wind turbines with an individual capacity of 5.5MW are due to be installed.
We note that Hyundai Engineering & Steel Industries is expected to prepare for offshore wind power projects not only in Korea, but also in other East Asian countries by establishing a cooperative relationship with Denmark’s Orsted. In addition, the firm is developing an installation ship with a capacity of 13,000 tons for large turbines.
Note: Including the Southwest Sea Wind Power Demonstration Complex Phase 1 project and the Tamla Offshore Wind Power Demonstration Complex, most offshore wind farm projects in Korea are being led by KEPCO.