Hyundai Engineering IPO aims to expand green energy business

Hyundai Engineering CEO Kim Chang-hag

By Lee Kyung-min

Hyundai Engineering, the construction affiliate of Hyundai Motor Group, will accelerate its green energy transition by venturing into new high-tech energy businesses with funds raised via its upcoming initial public offering (IPO) on Feb. 15, the company CEO said Tuesday.

Sustainability will be the top growth priority for the benchmark KOSPI listing ― a goal highly feasible for the firm, underpinned by its years of experience in the fields of engineering, procurement and construction (EPC), chemical and energy plant construction and infrastructure construction. EPC entails turnkey solutions, whereby a construction firm provides a complete package of said services.

Cooperation between Hyundai affiliates will be bolstered to create momentum for stable, clean, hydrogen-oriented energy generation, sustained by hefty investments in and technology partnerships for utilizing plastics, ammonia and greenhouse gases. Among the firm's renewable businesses portfolio is the Micro Modular Reactor (MMR), a nuclear energy system that delivers safe, clean and cost-effective electricity and heat.

“The KOSPI listing of our firm will advance our energy conversion and green business capabilities promptly, thereby helping us better prepare for a sustainable future as a leading construction firm with strong brand power gained via solid growth, based on our record of success in global EPC projects and housing construction,” Hyundai Engineering CEO Kim Chang-hag said during an online press conference.

Meaningful sales figures are expected as early as 2024, since the new businesses are largely extensions of existing growth models, and are therefore proceeding without complications, he said.

“We expect meaningful sales figures between 2024 and 2025. The ultimate goal is to increase the sales of the new businesses to account for 10 percent of the entire firm by 2025.”

Kim dismissed the notion that the firm's 16 million publicly offered shares will be used to strengthen the Hyundai owner family's grip on corporate governance, a valid concern since 12 million of the total ― or 75 percent ― are held by Hyundai Motor Chairman Chung Euisun among other owner family members.

“Our firm will not undergo a major change to its status in the corporate shareholder loop, since the shares held by the largest shareholders will be lowered to around 70 percent, down from 90 percent. The need for further equity financing to buttress our new business plans is minimal, given our 1.8 trillion won ($1.5 billion) cash at the ready,” Kim said.

A quarter of Hyundai Engineering's sales is generated by construction for group affiliates, including Hyundai Motor and Hyundai Steel.

This is a basis for sound corporate financials and a stable growth outlook, as evidenced by the highest credit rating (AA-) among nine construction market players.

Up to 1.2 trillion won will be drawn via a two-day public subscription process from Feb. 3 to 4, following institutional investors' book-building ending today. The desired price per share for the publicly offered shares is between 57,900 won and 75,700 won. The market cap total will amount to 6.5 trillion won.

The underwriters include Mirae Asset, KB Securities and Goldman Sachs.