STX Combines Alternative With Conventional Businesses
By Kim Yoo-chul
Staff Reporter
STX Corp., STX Shipbuilding's parent, is also engaged in solar power development, an area dominated by big conglomerates.
"There may be a lot of competition in the downstream operations involving solar power, but we believe there will be a lot of money to be made for a long time to come," group chairman Kang Duk-soo told The Korea Times, Monday.
In order to follow the latest pitch by shipbuilders toward alternative renewable energy businesses, the group's affiliate STX recently signed a memorandum of understanding (MOU) with the regional city of Gumi, North Gyeongsang Province, to set up a 50-megawatt solar cell plant on a tract of 57,949 square meters.
The new facility, set to go into operation in 2009, will produce modules and be responsible for energy generating systems, according to STX officials.
"Meanwhile, we will invest 200 billion won over the next five years, starting this year, to fuel additional momentum in our solar-related businesses," its spokesman Lee Kwang-ho said.
By 2014, STX Solar is expected to generate around 1,000-megawatts in solar power per year with sales of some 1.6 trillion won, he added.
STX Solar was established last year with an initial investment of 60 billion won financed by STX Energy and STX.
While analysts say there is no end to the upswing in sight despite some factors threatening to burst the bubble, STX is working to develop resources in Southeast Asia and Africa as well as marine oil fields in the Caspian Sea's Inam block.
Last November, its energy-focused unit STX Energy contracted an MOU with the state government of Kepulauan Riau, Indonesia, for the construction of the Bintan power plant and supply of electrical power.
Under the mutual agreement, the construction of a 100-megawatt thermal power plant and power-transmission lines for delivering electrical energy in Bintan island of Kepulauan Riau is on track.
After the completion of the power plant, electrical power is to be supplied to the industrial complex and large-sized resort complex within the area. The plant is to be fully operational for commercial purposes sometime next year.
Officials say the group is planning to keep its steady stance in offshore wind power generation as countries, with a very long coastline, are embracing offshore projects as another core energy source.
Overseas Projects
STX is also among energy companies and trading houses in Korea ― the world's fourth-largest crude importer ― seeking investment in overseas oil projects for exploration access and production rights.
Last week, the group's STX Heavy Industries secured an order in the United States to build a drill ship _ widely used for larger oil exploration projects ― worth $1.2 billion including an option for future orders.
In 2007, STX Energy had farmed into three Royal Dutch Shell assets in the Faroe island and offshore Ireland. It took a 10 percent stake in the "007 Block" near the Faroe and a 25 percent stake in adjacent licenses.
The deal still marks STX’s first upstream acquisition after its decision to diversify into petroleum. Officials say the deal is only for an investment role in the projects, but is hoping to build up its technical expertise by collaborating with foreign majors in acreage with good potential.
"We are in the process of developing more overseas projects in raw materials such as gas, iron ore as well as oil, despite Baltic Dry Index (BDI) moves," the spokesman said.
BDI is recognized as a global barometer of shipping costs for dry bulk or raw materials goods.
BDI has been experiencing volatility since China’s steel industry boom and movement in the grain trade has added to this volatility as droughts in Australia and Ukraine led to re-routing, according to industry watchers.
The Capesize Index, which includes vessels mainly used for iron ore shipment also dropped. The freight market has been further weakened by Brazil's Vale deferment of shipments while it asks for more money for its iron ore from the Chinese.
Global Economic Woes
STX is hopeful that the credit-crunch will leave Asian shipping and shipbuilding relatively unscathed.
"Though the general environment for business is not as healthy as last year, it is predicted that the impact on the shipping and shipbuilding industries will be insignificant," chairman Kang said.
"The current global depression has been caused by the unstable financial market ― mainly in advanced nations ― triggered by the sub-prime mortgage fiasco. But the center of the world's shipbuilding and shipping industries is not in advanced nations like the U.S. and Europe any more," he said.
"I suspect the slowdown in the U.S. economy will continue for three to five years, and as a result, there is a considerable possibility that emerging countries may be faced with foreign exchange and financial difficulties."
