By Cho Jin-seo
Staff Reporter
The word ``new energy'' is often accompanied by big expectations and small outcomes ― everyone is talking about it but few of them are making big money, and the market still heavily depends on government financial support. That is probably why LG Group officials take a down-to-earth attitude when talking about this sector.
``The market is still uncertain for firms to make aggressive investments,'' said Park Seong-joon, who leads LG CNS' solar power plant projects. ``The government's administrative support to the new energy market is very necessary for Korean firms to become globally competitive.''
However cautious he may sound, LG Group is the outstanding player among Korean conglomerates in the new energy field. What distinguishes LG Group from others in the new-energy hype is its methodical role sharing. The group's portfolio is composed of a vertical lineup, and each firm is assigned with specific roles to minimize the financial risk and to create synergy.
For example, LG Chem and LG Siltron are developing basic materials for solar panels and modules made of silicon wafers. LG CNS is financing and building solar power plants, and LG Solar Energy will run the facilities and sell the electricity to utility companies. LG Electronics, the flagship company of the group, is committed to selling thermal-energy heaters and business-to-business energy consulting.
Such a wide range of new-energy initiatives is orchestrated by the group's holding company, LG Corp. The group headquarters established LG Solar Energy in September by investing 46 billion won. The move drew special attention from investors, as it was the groups' first new business since in three years.
``Launching new businesses such as the LG Solar Energy can create synergy between subsidiaries, and therefore it can be a powerful growth engine for LG,'' said Lee Hoon, an analyst of Woori Investment & Securities, in a report last week.
When LG Group was separated three-way to LG, LS and GS groups in 2004, it is known that their major shareholding families made a gentlemen's agreement not to interfere with each other's business. LG has been focused on the manufacturing field such as electronics and chemicals, while the energy-related businesses such as gas and oil refineries are left to GS.
LG circumvented the tacit agreement by embarking on the new energy field in which GS has shown little interest. The solar business also helps LG have a better corporate image, such as ``green,'' ``high-tech,'' and ``socially responsible.''
``Eco-friendly businesses are a mandatory industry to overcome worsening environmental factors such as high oil prices, global warming and contamination,'' an LG Corp. official said. ``It is also the next-generation growth industry where we can compete globally with our high-tech engineering and manufacturing know-how.''
While LG does not limit its interest to one type of new energy, it is solar energy that the group is showing most interest in. The most conspicuous player in this field so far is LG CNS.
Last week, the firm started building a massive solar farm in Boryeong, South Chungcheong Province, which is its ninth solar project in South Korea since last year. The project will cost 52 billion won and the facility will produce 7 megawatts of electricity per hour from late next year, which will be one of the largest source of new energy in South Korea.
``The solar farm is 21st century's ginseng field by its appearance and by its nature,'' said Park. The rows of black, tilted solar panels look just like the sun shades set up on the Korean herb farms, he explains. ``And they both are harmless to the environment and to people living nearby.''
LG CNS is originally a computer engineering company. It designs, develops and operates all kinds of computer network systems for LG Group and other private and public organizations. The company first joined the solar energy market last year in search of a new growth engine, as the IT service sector has been almost saturated after a decade since the dot-com boom.
Though the IT and solar power sectors do not seem to have much in common, it was a wise choice to start it earlier than most others, Park said.
``We have built up strength in financing and managing business projects. And those are the core part of building a solar power plant,'' he said, adding that there are a number of small companies doing the same job but none of them are as big and as reliable as his firm.
Because there is no Korean manufacturer, LG CNS imports the solar panels from Japan and Germany. The completed facilities are handed over to LG Solar Energy or to local governments on turnkey bases.