Hyundai Heavy Industries (HHI), a wholly-owned subsidiary of Korea Shipbuilding & Offshore Engineering (KSOE), plans to raise 1 trillion won ($904 million) in a listing on the main KOSPI market this year as it focuses on environment-friendly projects.
Directors approved a plan on Tuesday (January 26) to issue new shares equivalent to a 20% stake in the company to finance the 1 trillion won investment in projects to develop environmentally-friendly vessels and low-carbon dockyard technologies, as the firms seeks global leadership in green sea mobility over the next five years.
The shipbuilder is expected to start a process soon to select its sale manager.
The move is part of HHI’s efforts to meet eco-friendly requirements in the low-carbon era and to advance dual fuel engine-propelled ships as environmental regulations are strengthened in the shipping industry. HHI is the largest shipbuilder in the world in terms of numbers of liquefied natural gas (LNG) carrier orders.
The International Maritime Organization is targeting a 40% decrease in carbon intensity in the global fleet by 2030 compared with 2008 levels, and a 50% reduction in greenhouse gas emissions by 2050.
HHI has been focusing on winning orders for eco-friendly vessels like LNG carriers since 2017 by hosting presentations in major seaports in the world, including Busan, Tokyo, Singapore, London and Athens.
The IPO process is at an early stage, with requests for proposals (RFPs) yet to be distributed to securities firms. While HHI’s plan surprised many securities firms, some investment banks said it had been expected and was only a matter of time.
HHI was split into two entities – intermediate holding company KSOE and operating company HHI – in May 2019 so it could acquire Daewoo Shipbuilding & Marine Engineering. HHI retained the shipbuilding, offshore plants and engine businesses.
KSOE has subsidiaries HHI, Hyundai Samho Heavy Industries, Hyundai Mipo Dockyard and Hyundai Energy Solutions under its wing. Only HHI and Hyundai Samho Heavy Industries are not listed on local stock markets, while the latter raised money through a pre-IPO in 2017.
HHI is likely to face time constraints with the IPO as it has to go through a number of processes, including distributing the RFP, selecting a sale manager, conducting an audit, and applying for a preliminary review to list its shares by the end of this year.
Market insiders said the company may want to close the deal swiftly as the shipbuilding and shipping markets are showing signs of recovery and eco-friendly businesses are attracting strong interest.
New global orders for ships are expected to reach 23.8 million compensated gross tons this year, equivalent to 974 ships, according to Clarkson Research Service. This would represent a 21% increase over 2020 levels. (Reporting by Suk-cheol Choi)