New Horizons Autumn 2011

COVER STORY

All-round Player in Offshore Engineering

A Publication of Hyundai Heavy Industries www.hyundaiheavy.com

Autumn 2011

C O N T E N T S

20FEATURE

HHI Leads Low-carbon Green Growth

34 HHI GROUP

Hyundai Samho Heavy Industries

36FINANCIAL NEWS

Expecting More in the Future

38ANALYST REPORT

Best Bet in Korean Shipbuilder

39KOREAN PANORAMA

F1 Korean Grand Prix

09HHI ROUNDUP

New Tidal Current Power Business

16EVENTS

Bongkot Offshore Platform Sails Out

18NEW PRODUCTS

Hyundai Excavator R1200-9

World’s First New LNG FSRU

24TECHNOLOGY

Integrated Noise & Vibration Prediction and Control Systemfor Construction Equipment

25VIEWPOINT

Welcome to the Global Marketplace

26PEOPLE

Revving Up Recovery on Principles

Strong Belief Leadsto New Growth

05COVER STORY

All-round Playerin Offshore Engineering

New Horizons is published by Hyundai Heavy Industries Co., Ltd. and is distributed free of charge. For a complimentary subscription, contact the Overseas Public Rela-tions Department at [email protected], tel +82 52 202 2345, fax +82 52 202 2347. New Horizons is now available to download in pdf format at http://www.hyundaiheavy.com/press/newhorizons.asp The opinions expressed by the authors are not nesessarily those of Hyundai Heavy Industries Co., Ltd.

A U T U M N 2 0 1 1

04 CEO MESSAGE

Strength through Momentum

30 GLOBAL HHI

Al Dur Power & Desalination Plant Project: New Challenge for Industrial Plant Projects

From energy-saving marine engines to complete renewable energy solutions, HHI is quickly becoming a green energy powerhouse.

Boasting a strong reputation in fixed platforms and floaters, HHI’s Offshore & Engineering Division

Hwagak, brilliant horn, is an ancient form of Korean art so exquisitely difficult to prepare it. Therefore, it was reserved for use only by the royal family. Hwagak is created from pieces of ox-horn fired at very high temperatures and flattened paper-thin until nearly trans-parent. It is then illustrated—typically in brilliant reds, blues, yellows, blacks, and whites—before being placed onto wooden furniture or carvings. Illustrations often use images depicting symbols of longevity, such as holy animals and animals indicating peace and harmony. Hwagak has all but vanished due to the high cost and difficulty of the art being made obsolete by modern techniques.

H w a g a k

Ox-horn Lacquered Plate Chest 64 × 63 × 40 cm, Han Chun-seop

COVER STORY

All-round Player in

Offshore Engineering

04New Horizons Autumn 2011

Strength through Momentum

CEO MESSAGE

With summer behind us, we are now more than halfway to achiev-

ing the goals we have set for this year. By leveraging our sales efforts and consis-tent new orders, we achieved KRW 12.4 trillion in total sales in the first half, an increase of 15.7 percent over the same period last year. We won new orders worth USD 18.1 billion, 68.1 percent of our goal for 2011. With this momentum for high-value added and special ships from the first half of the year, we expect new orders to con-tinue rolling in. The Shipbuilding Divi-sion is expected to sign optional contracts for drillships and LNG FSRU and to win more orders for LNG carriers on strong demand for natural gas as a clean energy source. For the remaining period, how-ever, the Shipbuilding Division needs to stand out from the long shadows cast on the conventional ship market such as tank-ers and bulkers. The Engine & Machinery Division has achieved 67.3 percent of its annual new order target, propelled by ris-ing demand for newbuildings. The Offshore & Engineering and Industrial Plant & Engineering divisions tackle high-profile onshore and offshore projects by bidding for big ticket items in Australia, the Middle East, and Africa. The two divisions are demonstrating their unique capabilities in carrying out both onshore and offshore works as a single-

package contractor. They expect to seize new opportunities in the industrial trend toward larger projects in energy-related plants, power plants, and desalination plants. Looking to establish a stronger presence in both advanced and emerging markets, we are expanding overseas production bases to secure supply chains in the global market. Better market ac-cess will help realize more competitive pricing, low-cost logistics, and contribute to creating more jobs in local markets. These efforts will also allow us to respond strategically to tighter local-content stan-dards required by local governments in large-scale projects. Brazil is one of the fastest growing economies and Hyundai Heavy Industries is ready to extend market share there. We started a strategic business partner-ship with OSX Brazil to provide technical advice and staff training for constructing a shipbuilding yard. HHI’s Construction Equipment Division also will build an excavator factory in Rio de Janeiro by the end of 2012. This plant is expected to serve as the Latin America base helping secure market share, and provide better service to clients in the region. The Electro Electric Systems Divi-sion is building a power transformer fac-tory in Alabama, USA to turn out 220 medium-size transformers annually for

the North and Latin American markets from the end of 2011. The division also plans to open a gas insulated switchgear plant in Russia and to supply 1,000 GIS to Federal Grid Company of United En-ergy System for five years from 2013. The Green Energy Division will be up for its first production of wind turbines be-fore the end of the year in a new 600 MW wind turbine plant in Weihai, China. The Construction Equipment Division plans to open a new plant in Taian in China's Shandong province, and will produce 8,000 wheel loaders for the world’s largest con-struction equipment market. The Industrial Plant & Engineer-ing Division plans to build a plumbing plant in Nigeria, the largest oil and gas producer in Africa, and pursue more op-portunities for industrial plant business by localizing production for components and more efficient project management. Closer to home, our amicable indus-trial relationship serves as a role model for mutual cooperation and trust between management and labor. We believe all our business activities should be based on a solid foundation of mutual trust with our clients and on harmonious coopera-tion with our employees. We always aim high to serve the best interests of our clients, business partners, investors, and our workers. We ask for your continued support and patronage.

Boasting a strong reputation in fixed platforms and floaters, HHI’s Offshore & Engineering Division

Momentum from new trends and entry into new markets will build HHI’s future growth.

Lee Jai-seongPresident & CEO

Kim Oi-hyunSenior Executive Vice President & CEO



COVER STORY

A versatile, all-round player in the global offshore engineering market,

Hyundai Heavy Industries looks set to clinch more lucrative deals with new op-portunities opening up in deep sea waters. Over the past three decades, HHI has transformed itself from a fabricator to an industrial giant capable of offering a broader set of end-to-end solutions to world-wide clients for energy develop-ment vessels and offshore plants - from design to manufacturing and installa-tion. “Our Company has now become the world’s leading total solutions provid-er,” says Mr. Kang Chang-june, execu-tive vice president & COO of HHI’s Off-shore & Engineering Division. Mr. Kang, a 33-year heavy industry veteran who spent 15 years at the divi-sion’s design team, says HHI’s business success in recent years owes much to its ability to provide a detailed and optimal design solution for clients. He said his di-

vision was in the red until 2003 mainly because of a lack of engineering talent ca-pable of independently performing de-manding jobs in line with client needs. “We now have 1,400 people in our engineering team, more than any of our competitors. This is what gives us the edge,” said Mr. Kang. The highly rated designers and other talented workers in his division have been pushing hard to deliver a strong business result despite a prolonged slump in the global economy.

Strong Growth Momentum The division has overcome a trying eco-nomic environment in recent years to keep a robust growth momentum, serv-ing as a new growth driver for the Com-pany. The world’s largest shipbuilder is aggressively diversifying its business port-folio into offshore plant & engineering, green energy, and other sectors. Mr. Kang said his division is on course

to meet its ambitious goal of winning USD 4.8 billion in new orders for 2011 after posting a record USD 3.06 billion in 2010. In the first half of this year, his division has already won new orders worth USD 3.13 billion, surpassing the value of orders re-ceived for the whole of 2010. This year’s new orders include a USD 1.24 billion contract with BP to build a floating, production, storage and offloading unit for the Quad 204 Project in the North Sea. HHI will undertake all the project work covering engineering, procurement, construction and offshore hookup & commissioning of the FPSO which requires high-end design and high quality construction to meet strict safety and environmental regulations. BP also awarded a USD 600 million contract to Hyundai Heavy Industries to build a drilling & production platform and living quarters for the Clair Ridge Field of the Shetland Islands in the North

Sea. Another major deal won by the divi-sion this year is a USD 860 million proj-ect to execute the offshore part of the Barzan Gas Project in Qatar. This will cover wellhead platforms, subsea pipe-lines, and cables. The division also won a USD 231 million deal to build the world’s larg-est semi-submersible heavy transporta-tion vessel for Dockwise. The vessel is designed to transport more than 110,000 tons of oil and gas production facilities including FPSO units. FPSO units are usually transported by two or three tug boats from shipyards to operating sites, taking several months to complete the mission. The newly built vessel will halve the delivery time. “We expect to win more orders in the second half with large-sized projects up for bidding in such regions as Australia, West Africa and Southeast Asia,” said Mr. Kang. He sees his division’s revenues reaching

about KRW 4.0 trillion in 2011, which is expected to account for about 15 percent of HHI’s total revenue.

New Opportunities Though HHI is maintaining its strong competitive edge in fixed platforms, FPSO and oil pipeline market, the Com-pany is also sharpening its focus on mega-sized LNG FPSO, an array of so-phisticated subsea systems, and offshore wind power plants. “There are so many competitors in the FPSO and fixed plat-form market, so we are also looking at other areas too,” said Mr. Kang. HHI is keen to beat rivals to win a massive LNG FPSO deal from Petrobras of Brazil. The oil giant is expected to open bids for the long-awaited deal, esti-mated to be worth about USD 4 billion, later this year. Analysts expect a surge in liquefied natural gas demand from Japan and world-

wide because of rising fears about nuclear power. Since an earthquake and tsunami unleashed a nuclear disaster at Japan’s Fu-kushima reactors in March, some countries have distanced themselves from nuclear energy. The German Chancellor Angela Merkel announced her intention to shut down all of her country’s nuclear facili-ties by 2022. Prospects look bright for the offshore engineering market as oil majors and oil producing nations will keep trying to explore oil and gas fields in deeper seas. “We are witnessing an aggressive push to explore natural gas in Australia, Indonesia, and other Southeast Asian na-tions.” said Mr. Kang. “This will lead to increased orders for floating LNG FPSO and large-sized onshore LNG modules.”

Dry Dock Mr. Kang said HHI was well prepared for a strong order momentum with a new dry dock in its offshore yard com-

Not content to rest on its laurels, HHI’s Offshore & Engineering Division is ready for the oncoming storm of orders.


COVER STORY

pleted in 2009 to manage a surge of new offshore engineering projects. The 10th dock, 490 m in length and 115 m in width, is mainly used by the Offshore & Engineering Division to produce super-large FPSO vessels. Outside the newly-built office build-ing of the Offshore & Engineering Divi-sion, two Goliath cranes with a lifting ca-pacity of 1,600 tons each dominate the skyline as workers toil to build the huge structures. The new dock will enable the Off-shore & Engineering Division to shorten the period for building FPSO, advance the delivery time, and save costs for cli-ents. It will also help the division to pur-sue contracts more aggressively without being constrained by space requirements within the yard. The Usan FPSO, built in this dock, sailed out in late April to Bonny Island in Nigeria. The USD 1.7 billion colossal structure (320 m x 61 m x 32 m), weigh-ing 125,000 metric tons with a storage ca-

pacity of 2 million barrels, is a “refinery at sea” capable of performing all the pro-cesses of oil production. Usan FPSO, regarded as one of the best FPSO in the world in terms of de-sign and quality, will begin its production from next year. The facility can refine 180,000 barrels of oil and 5 million cubic metres of gas daily. Last year, the division won a USD 1.16 billion deal to build a production vessel for the Goliat Field in the Barents Sea. Goliat, the first offshore oil develop-ment in Norway’s Arctic region, is ex-pected to come on stream in November 2013 with an FPSO unit of a cylindrical design. HHI won the contract for engi-neering, procurement, construction and transportation of the vessel in a competi-tive tender process. Asked whether China is emerging as a rival in FPSO business, Mr. Kang said “They are behind us in technology for building large-size structure platforms and floaters.” Mr. Kang said it will take a long

time for China to catch up with South Korea in the offshore engineering sector which requires a higher level of technol-ogy and experience than shipbuilding.

Brief History HHI’s first involvement in offshore struc-tures dates back to the late 1970s with an order for 89 jackets and deck struc-tures for the Open Sea Tanker Terminal (OSTT) as part of Saudi Arabia’s Jubail Industrial Harbour Project. The multiple projects for the OSTT were valued at USD 931 million, equi-valent to about a quarter of Korea’s na-tional budget at that time. Most of the jackets were fabricated in Korea and transported to Saudi Arabia by barge, a process that went beyond conventional wisdom. Encouraged by this initial success, HHI has grown into a leading turnkey contractor capable of delivering all types of offshore facilities.

The writer is a journalist based in Seoul.

CompanywideShipbuildingOffshore & EngineeringIndustrial Plant & EngineeringEngine & Machinery Electro Electric SystemsGreen EnergyConstruction Equipment

cause the drillships will be equipped with a thruster canister. A canister is housing for the thruster. It helps keep the ship in position while it is drilling. Canister-equipped ships do not need to be dry-docked for maintenance as the thruster can be lifted onto the ship when work needs to be carried out.

The Shipbuilding Division received a USD 1.12 billion order to build two drill-ships for drilling contractor Rowan Com-panies on May 31. This contract also in-cludes an option exercisable by Rowan to order an additional same-class drillship. The vessels, measuring 229 m in length and 36 m in width, are rated for operations in water 12,000 ft (3,657 m) deep. They are scheduled to be delivered by the second half of 2013 and the first half of 2014. Winning this order brings HHI’s to-tal drillship new orders this year to nine, worth about USD 5 billion, with options to build three more drillships. Owners will be able to save time in maintenance and operating costs be-

HHI held a launch ceremony for the next-generation frigate, Incheon on May 4. The launch ceremony was attended by Chief of Naval Operations Admiral Kim Sung-chan, HHI’s president & CEO Mr. Lee Jai-seong, and other government and military officials. The frigate was named after the city Incheon. The Incheon has greatly improved

capabilities including five inch guns, anti-surface missiles, anti-aircraft missiles, torpedoes, and anti-submarine helicopter. The frigate also has sonar for enhanced submarine detection and 3D navigation radar. In addition, the military vessel uses stealth technology to minimize exposure to electromagnetic waves, infrared signature, and underwater noise detection.

The frigate measures 114 m long, 14 m wide, and 25 m deep, and can sail at a maximum speed of 30 knots with a cruising range of about 8,000 km. Ordered in December 2008 and due for delivery to the Korean Navy in December 2012, the Incheon is the first of the next-generation vessels being built to replace the existing frigates and corvettes.

Launch Ceremony for Next-Gen FrigateHHI completed the site trial of a proto-type 500 kW tidal current power system at Uldolmok Passage in Jeollanamdo, southwest Korea on June 9. HHI’s prototype tidal current power system directly connects a tidal turbine, a gearbox, and a generator for power transmission. The system can operate re-gardless of current direction using a spe-cially designed turbine system.

After completing factory and basin tests last year, the Company successfully produced target power generation from site trials this May. Based on the data collected from the trials, HHI plans to pursue tidal cur-rent power farm projects by scaling up power generators. The Company is also part of the government-backed National Project for Developing MW-class Tidal

Current Power Farm with other Korean companies. The project is due to be com-pleted in 2014. Tidal current power is a form of hy-dropower that converts the kinetic ener-gy of the tidal currents into electricity us-ing turbines. This type of green energy is now in the spotlight thanks to its weath-er-proof and sustainable power generat-ing nature.

New Tidal Current Power Business

HHI ranked 220th in Fortune’s 2011 Top 500 Global Corporations list with USD 39 billion in annual revenue. The Company jumped 155 places from last year’s 375th. HHI was first mentioned on the list at 422nd in 2007, ranked 378th in 2008, and 355th in 2009, showing steady growth and consistantly outperforming

Shipbuilding

Shipbuilding

Companywide

Companywide Shipbuilding

Ranked 220th in Fortune Global 500

HHI ROUNDUP

USD 600 Million Order forLNG Carriers The Shipbuilding Division clinched a USD 600 million order to build two 155,000 m³ LNG carriers, including an option for another same-class vessel, from Greece-based Dynagas on May 31. These membrane-type LNG carri-ers, measuring 275 m long, 44.2 m wide, and 26 m deep, are due for delivery in the second half of 2013. They will feature the Dual Fuel Die-sel Engine System which allows the ship to run on oil fuel or natural gas. Due to tight-

its competitors. But the Company ranked 375th in 2010 because even though sales increased, the Korean won’s soaring ex-change rate in 2009 dampened gains.

ening global regulations on carbon emis-sions, increasing demand for LNG as an alternative energy source after the Japa-nese nuclear crisis, and price competitive-ness of LNG in comparison with oil prices, the division expects to see more liquefied natural gas carrier orders in the future.

USD 1.12 Billion Drillship Order

HHI-built drillships are designed specifically as drillships, not converted from existing ships. The design helps sta-bilize the drillship while operating and helps in fuel efficiency. A position con-trolling system, a computer propulsion system, and seven ram blowout preven-ters will also be installed in the drillships.




The Engine & Machinery Division com-pleted a new 4,000-unit capacity industri-al robot factory in Ulsan, South Korea on June 2. With the completion of the state-of-the-art robot plant, the Company more than doubles its annual production of au-tomobile assembling robots and LCD handling robots. At the completion ceremony, Mr. Kwon Oh-shin, COO of the division said, “HHI is a trusted robot manufac-turer with continuous technology devel-opment and reliable service. Building

on our 40 percent market share in South Korea, the new factory is a step to be-coming a Top 3 global industrial robot manufacturer by 2014.” HHI is the only Korean company independently producing industrial ro-bots. The Company has exported auto-mobile assembling robots and LCD han-dling robots to Brazil, China, the EU, and India. Last March, the Company also developed core equipment for the US FDA-approved surgical robot for ar-throplasty, Robodoc.

New Industrial Robot Factory

HHI ROUNDUP

MOU for New Nigerian PlantHHI signed a memorandum of under-standing with Bayelsa State Government to build a plumbing plant in Nigeria on June 23. The 150,000 m² plant will be built on Brass Island, Bayelsa and will manufacture pipes and steel frames from the end of 2012. Nigeria, the largest oil and gas pro-ducer in Africa, will pursue more oppor-tunities for industrial plant business with this plant, helping HHI localize produc-tion for components and effectively man-age deadlines for projects in Africa.

Orders for 39 HiMSEN GenSetsThe Engine & Machinery Division won orders for 39 HiMSEN GenSets from major Japanese shipyards. Of those or-dered, 24 sets will be installed on six 73,000 DWT and two 55,000 DWT bulk carriers at Oshima Shipbuilding; 12 sets for four 73,000 DWT bulk carriers at Mitsui Engineering & Shipbuilding; and 3 sets for three crane barges at IHI-MU. Japanese shipyards have recently

Early Commercial Operation Starts at Sabiya Power PlantThe HHI/GE-built Sabiya Gas-fired Combined-cycle Power Plant in Kuwait started early commercial operation in

June. The plant will help relieve chron-ic power shortages in Kuwait during the peak summer season. HHI and GE clinched this USD 2.6 billion order in September 2009. With total electricity generation ca-pacity of 2,200 MW, the Sabiya Power Plant will be completed in July 2012 and will be the biggest power plant in Ku-wait. Currently, the plant is generating and supplying 1,400 MW of electricity to households and industry. This is equal to 10 percent of Kuwait’s total electricity production. After completion, the plant will also use the wasted heat from tur-bines for cogeneration.

Groundbreaking for BTX PlantHHI, Cosmo Oil, and Hyundai Oilbank held a groundbreaking ceremony for a new BTX plant in Seosan, western Ko-rea on July 8. The BTX plant will pro-duce high-value added petrochemicals such as benzene, toluene, and p-xylene. Over 200 guests including Mr. Kimura Yaichi, CEO of Cosmo Oil; Mr. Kwon Oh-gap, CEO of Hyundai Oilbank; and Mr. Cheon In-soo, COO of the Industri-al Plant & Engineering Division joined the ceremony.

The Industrial Plant & Engineering Division won this KRW 4 trillion order from Hyundai Oilbank and Cosmo Oil in April. The division will build the No.2 BTX plant, 15 storage tanks, and auxilia-ry facilities by June 2013 next to the ex-isting No.1 BTX facility in Seosan. This plant will be able to produce around one million tons of p-xylene and benzene annually. Completion of this facility will expand Hyundai Oilbank’s production capacity three-fold.

Power-Gen Europe 2011The Electro Electric Systems Division participated in Power-Gen Europe 2011, Europe’s premier conference and exhi-bition for power generation, held from June 7 to June 9 in Milan, Italy. At the exhibition, the division show-cased models of its 420 kV substation, cubicle-type gas insulated switchgears, 245 kV gas insulated switchgears with earthing switch & disconnecting switch, cast resin transformers, induction motors, low/medium voltage circuit breakers, high voltage inverters, and pumps. The exhibition was attended by 500 exhibi-tors and 20,000 visitors.

Signing Ceremony for Switchboard Plant in Saudi ArabiaHHI and Abdul Mohsen Al-Moushegah Group signed an agreement for license and technical support to build a switch-board plant in Saudi Arabia on May 4. This is the Electro Electric Systems Divi-sion’s first project in its long-term strategy of exporting technology and equipment through its overseas partners to expand localization.

The Electro Electric Systems Divi-sion will provide license, technology, and major equipment to the Saudi Arabian plant, which will manufacture finished products. Starting with this plant, the division is planning to build a technical support network for long-term sales expansion by establishing a cooperative relationship with overseas partners through the ex-port of its technology and equipment.

started ordering non-Japanese marine GenSet engines for their new shipbuild-ing projects to expand the number of sub-suppliers located outside Japan. HHI was able to win these orders because of the HiMSEN GenSet's light-weight de-sign, high-output, and high efficiency.

Work Commencement for the World’s Largest Cylinderical FPSOThe Offshore & Engineering Division held a work commencement ceremony for Eni Norge’s floating, production, stor-age and offloading unit of the Goliat Proj-ect on June 1 in Pohang, South Korea. The Goliat FPSO measures 112 m in diameter and 75 m in height, weighing 52,000 tons. This will be the world’s larg-est cylindrical type floater. The cylindri-cal floater will be able to produce more than 100,000 barrels of crude oil and 3.9 million m³ of gas per day. It will be deliv-ered to Eni for installation in the Goliat Field, 85 km northwest of Hammerfest, Norway in the middle of 2013. The cylindrical configuration will give more stability to the vessel while it is

Industrial Plant & Engineering Engine & Machinery

Offshore & Engineering

Industrial Plant & Engineering

Industrial Plant & Engineering

Engine & Machinery

Electro Electric Systems

Electro Electric Systems


operating in the harsh winds and rough seas of the Arctic.


HHI to Build GIS Plant in RussiaHHI announced an investment of KRW 40 billion to establish Hyundai Elec-trosystems, a gas insulated switchgear plant, in Vladivostok, Russia. Hyundai Electrosystems will com-plete the 40,000 m² plant by August 2012. The plant will produce 250 units of GIS ranging from 110 kV to 500 kV a year. There are plans to expand its an-nual capacity to 350 GIS by 2015.

With the new plant, the Electro Electric Systems Division, which re-corded sales of KRW 52 billion (USD 49 million) last year in Russia, expects to achieve KRW 100 billion (USD 94 million) sales by 2013. Establishment of Hyundai Elec-trosystems has been drafted as a part of HHI’s long-term strategy to gain a foothold in the Russian GIS market. It

is expected that the Russian GIS mar-ket will see annual growth of 10 percent from 2012, reaching a market value of more than USD 700 million by 2017 due to the Russian government’s elec-tric power system modernization policy. Previously, HHI won an order from Federal Grid Company of United Energy System to supply 50 percent of its GIS needs from 2013 to 2017.

HHI ROUNDUP

Intersolar 2011The Green Energy Division exhibited HiS-S321MI, South Korea’s highest effi-

ciency solar cell, and a 500 kW inverter at Intersolar 2011, held in Munich, Ger-many from June 8 to June 10. Intersolar is the world’s largest exhibition for the solar industry. At the exhibition, attended by 75,000 visitors and 2,300 exhibitors, the division had a chance to showcase its re-liable solar power products including polysilicon, ingots, wafers, cells, modules, and inverters. The division prepared three meeting rooms on the second floor of its booth for client meetings throughout the event.


MOU for Construction Equipment Factory in BrazilHHI signed an MOU to build a con-struction equipment factory with the state of Rio de Janeiro and the municipal city of Itatiaia in Brazil on July 26. Under the MOU, HHI will make an investment of USD 150 million for the 562,000 m² factory in Itatiaia, Rio de Janeiro. The state of Rio de Janeiro and the municipal city of Itatiaia will devel-op infrastructure including laying down electricity, water and gas supply lines, and paving entry road.

Upon completion by the end of 2012, the plant will be capable of pro-ducing 2,000 construction equipment a year, including excavators, wheel load-ers, and backhoe loaders. HHI also plans to extend its annual production ca-pacity to 4,000 units by 2014. The Construction Equipment Divi-sion expects the new Brazilian plant will serve as the Latin America base helping HHI secure market share, and provide better service to clients in the region.

The Brazilian construction equip-ment market is expected to continue growing as various infrastructure proj-ects such as express trains, express high-ways, and hydroelectric power plant projects are expected to win approval in the run-up to the 2014 World Cup and 2016 Olympic Games. The Construction Equipment Di-vision currently has 20 percent market share in Brazil; the second highest.

The Construction Equipment Division plans to develop new 21-ton battery-pow-

ered excavators. Under the government sponsored project to develop 21-ton bat-tery-powered excavators, the division plans to complete the development of the construction equipment by 2016. The new battery-powered excava-tors will use 40 percent less fuel than oth-er types of excavators. The new excava-tors will also be eco-friendly in that they use electric motors to achieve zero gas

emissions. Mr. Koo Ja-jin, senior vice president and head of the division’s R&D team, said, “By developing battery-powered ex-cavators HHI will play a role in revitaliz-ing the domestic construction equipment parts industry including batteries, elec-tromotors, and inverters. Moreover HHI will take the lead in the world’s construc-tion equipment market by continuing to develop hi-tech construction equipment.”

HHI to Develop 21-tonBattery-powered Excavators

New Forklifts at CeMAT 2011 The Construction Equipment Division showcased its new forklift models at Ce-MAT 2011 in Hannover, Germany on May 9. At this year’s CeMAT, one of the world’s biggest logistics fairs, the division

unveiled 25 new forklift models includ-ing 25-ton forklifts and eco-friendly LPG forklifts (Models 15L-7/25L-7A/33L-7-A/50L-7A). The 250D-7E 25-ton forklift fea-tures improved fuel efficiency with a 260 horsepower engine adopting High Pres-sure Common Rail, and High-Output and Smooth Gear Shift with a proportional valve-equipped control system. The forklift also drew positive responses with new fea-

tures such as Load Indicator, Self Diagno-sis, and Auto Cruise function. The division also unveiled an eco-friendly LPG forklift meeting EPA Tier 4 emissions regulations, and concept electric forklifts. The Construction Equipment Divi-sion recorded sales of KRW 3 trillion last year and is aiming for KRW 4 trillion this year through increased sales in Europe, India, Latin America, and Russia.

Electro Electric Systems Construction Equipment

Green Energy

Construction Equipment

Construction Equipment

EVENTS

Bongkot Offshore Platform Sails Out

Hyundai Heavy Industries held a sail-ing-out ceremony for Bongkot off-

shore platform for PTT Exploration and Production Public Company of Thailand on July 7. Mr. Suraphong Lamchula, vice pre-sident of PTTEP; Mr. Chaiyong Satiji-panon, Ambassador of Thailand; and Mr. Kang Chang-june, COO of the Offshore & Engineering Division; participated in the ceremony with 220 other guests. The 30,000 ton platform can produce 385 million cubic feet of natural gas and 18,000 barrels of condensate daily. When

the platform starts production, PTTEP’s production capacity will be increased by nine percent. The biggest offshore platform in Thailand will be installed in the Great Bongkot South Field 4A, 600 km south-east of Bangkok, by the end of this year. There are one trillion cubic feet of gas re-serve. The platform will produce gas and condensate for 11 years. HHI won the order to build the USD 1 billion offshore platform in Sep-tember 2008. The Company carried out engineering, procurement, installation,

and commissioning of the gas processing platform, jacket, flare tower, and three bridges. Bongkot South gas is sour gas with high CO2 and requires advanced fa-cilities for extraction and processing. HHI has built 80 fixed offshore plat-forms so far. The Company’s experience includes Umm Shaif Gas Injection Facili-ties Project in UAE, the Yadana Medium Pressure Compression Platform Project in Myanmar, and the East Area Project EPC-1B in Nigeria.

The new R1200-9 120-ton excavator has thick tubing structure for the

cabin and a wide field of view enhanc-ing operator safety and comfort. The cabin measures 1800 mm wide, 1000 mm long and 1686 mm high. The seat, console, and armrest settings add to overall operator comfort and are easi-ly adjustable to maximize operator com-

fort. The 120-ton excavator also offers variable storage space. The operator can select their per-sonal machine preferences with an ad-vanced 7-inch interface screen and toggle switch. Featuring low fuel con-sumption and high-efficient hydraulic equipment, the new R1200-9 can reduce operating costs.

The new 120 ton earthmoving ma-chine is equipped with the remote man-agement system HiMate. The system provides operators and dealers’ service personnel easy monitoring of vital ser-vice and diagnostic information from any computer or mobile phone with in-ternet access.

NEW PRODUCTS

Hyundai Heavy Industries began work on the world’s first new

LNG Floating Storage Regasification Units (FSRU) on June 12. These vessels are scheduled to be delivered to Hoegh of Norway by the second half of 2013 and the first half of 2014, and will oper-ate for 40 years. LNG FSRU receive liquefied nat-ural gas from offloading LNG carriers. The installed regasification system pro-vides gas send-out through flexible risers (specially engineered hoses) and pipe-lines to shore. Demand for LNG FSRU is growing as they take a year less and cost half as much as an onshore LNG

terminal to complete. HHI’s LNG FSRU features a 20 year design fatigue life for the outer shell structure below the ballast water line to double the time between main-tenance sessions, from five years to ten. Typically, converted LNG FSRU need to be drydocked for repairs and mainte-nance for two to three months every five years. Because HHI’s LNG FSRU are built as completely new vessels, the boil off gas can be treated economically with the recondenser. The recondenser is smaller in size and consumes no electri-cal power to perform the role, thus sav-

ing cargo for shipowners. The total boil off gas management system is used to prevent burning or venting of boil off gas so it can be used to partially fuel the vessel. The boil off gas can also be reli-quefied through the recondenser to be mixed with feed LNG for regasification. Another feature of HHI-built LNG FSRU is the optimum location of the re-gasification unit. Most regasification ves-sels of this type place the system at the bow but this can increase costs. Moving the regasification unit to the ship center makes it easier to access and requires less cabling and piping to send the feed LNG from the storage tanks to the unit.

DESCRIPTION UNIT R1200-9

Maker - Cummins

Model - QSK23Engine

Rated power (net) HP (kW) / rpm 740 (552) /1,800

Max. torque kgf. m (lbf. ft) / rpm 354(2,558) /1,350

Operating weight kg (lb) 118,000 (26,010)

Bucket capacity m³ (yd³) 6.7 (8.76)

Swing speed rpm 5.6

Travel speed (low / high) km/h (mph) 2.3 / 3.2 (1.4 / 2.0)

Fuel tank capacity Litre (US gal) 1,450 (383)

Hydraulic tank capacity Litre (US gal) 670 (177)

Boom length mm (ft . in) 7,550 (24' 9")

Arm length mm (ft . in) 3,400 (11' 2")

R1200-9Hyundai Excavator World’s First New

LNG FSRU

TYPE 170k Membrane

Length 294.0 m

Hull Particular Breadth 46.0 m

Depth 26.0 m

Design Draft 11.6 m

Regasification Capacity 375 MMscfd

Cargo Containment System Storage Capacity 170,000 CBM

Tank Type Membrane Mark III

Speed km/h (mph) 10.0 knots



FEATURE

From energy-saving marine engines to completerenewable energy solutions, HHI is quickly becoming a green energy powerhouse.

HHI Leads Low-carbon Green Growth

Hyundai Heavy Industries, the world’s largest shipbuilder, is a pio-

neer and visionary in low-carbon green growth. Well recognizing the world’s ur-gent needs for environmental protec-tion and sustainable growth, HHI has aggressively carried out a stringent envi-ronmental management system. Years of heavy investments in green growth are now paying off in the form of eco-friend-ly products the Company produces and sharply reduced greenhouse gases emit-ted from its factories. As the global ship-building and related sectors embrace new and tougher environmental regulations, HHI is poised to lead others with its in-novative and effective green manage-ment. The Company has continuously minimized pollution and maximized re-sources and energy conservation to pro-vide a higher quality of life and a sustain-able future. To achieve this goal, HHI launched a new business division focusing on new and renewable energy. The new Green Energy Division will be involved in so-lar power, wind power and tidal power. These businesses were recently moved from the existing Electro Electric Systems Division. HHI expects the new division to be a future growth engine. “We believe

renewable energy is the answer for sus-tainable growth. HHI will be a leading force in its development,” said Mr. Kim Kweon-tae, chief operating officer of the division. The renewable energy industry is growing rapidly as concern for green-house gas emissions is increasing world-wide. This year, the division expects to record sales of KRW 1.2 trillion and aims to become a top 10 player in the global solar and wind power industry by 2025. “Timely investments and technology de-velopment are very important to grab a major share of the renewable energy market,” Mr. Kim said. HHI’s most notable achievement in this regard is the development and pro-duction of ships with extremely high fuel efficiency. The global shipbuilding indus-try is required by the International Mari-time Organisation to adopt the strict En-ergy Efficiency Design Index in the near future. The EEDI aims to reduce CO2 emissions from ships by more than 50 percent. To meet this new requirement, HHI has introduced a number of new engines that produce more power while consuming less fuel. Last year, the Com-pany completed the test run of the new-ly developed high output eco-friendly HiMSEN H35G Gas Engine. The new

gas engine can be used for ship propul-sion and power plants. The engine features “Lean Burn” technology and emits 20 percent less CO2 than diesel engines, and reduces NOx emissions by 97 percent to reach the world’s lowest level at 50 ppm. The engine has 47 percent efficiency, among the highest in the world. Last year, HHI also produced the world’s first engine meeting new IMO standards. The en-gine, delivered to Yangfan Shipyard in China, reduces NOx emissions by 15 percent. Another breakthrough in green shipbuilding is Korea’s first hybrid ship, delivered to the Korean Coast Guard in 2009. The 3,000 ton patrol vessel Taepyungyang 9 is 112.7 meter long and 14.2 meter wide with full speed of 28 knots. It is Korea’s first environmentally friendly ship. The ship uses an electric motor, not an engine, when sailing less than 12 knots. HHI installed a 750 kW class electric motor in the ship, improv-ing fuel efficiency and reducing vibration and noise. Normally, patrol vessels use two 10,000 bhp diesel engines only. In 2008, HHI delivered the world’s first 8,600 TEU containership equipped with a Thrust Fin to Hapag Lloyd. Thrust



Taepyungyang 9The 3,000 ton patrol vessel Taepyungyang 9

is Korea’s first hybrid ship, delivered to the

Korean Coast Guard in 2009. The ship can sail

with an electric motor, not an engine, when

sailing less than 12 knots.

By Peter Lee

Fin, which reduces fuel costs by more than five percent, is an airfoil-shaped de-vice that is attached to the rudder behind the propeller, maximizing thrust force. HHI delivered the world’s first Thrust Fin in 2006 and has already registered its patent in South Korea and applied for overseas patents in ten countries, includ-ing the US and Germany. HHI’s ships are also eco-friendly. The Company currently produces ships with a ballast water treatment system, named Eco-Ballast, which protects the marine environment from the transfer of foreign organisms via ballast water. It is composed of two main units – the filter and the UV reactor. The filter can signifi-cantly reduce the sediment load in the ballast water. The UV reactor is specially designed for this ballast water treatment

application to reduce the eco-footprint and to maximize the efficiency of the system. It is a chemical-free system with no potential harm to ships. Eco-Ballast meets all IMO guidelines. HHI is a leader in green construc-tion equipment business as well. Last year, the Construction Equipment Divi-sion began selling the world’s first elec-tric excavators that can cut maintenance costs by 70 percent. These electric exca-vators can reduce not only CO2 emis-sions but also vibration and noise con-siderably, while displaying much more power than conventional diesel excava-tors. HHI also released new eco-friendly models of excavators, forklifts, and wheel loaders meeting EPA’s Tier 3 regulations.These models reduce emissions of carbon monoxide and fine dust by 23 percent,

while raising power generation capacity by 15 percent. The Tier-3 engines also meet enacted gas emission regulations in South Korea, the US, and the EU. HHI has also moved into the tidal current power business. In June this year, the Company completed the site trial of a prototype 500 kW tidal current power system at Uldolmok Passage in Jeollanamdo, southwest Korea. Tidal current power is a form of hydropower that converts the kinetic energy of the tidal currents into electricity using turbines. This type of green energy is now in the spotlight thanks to its weather-proof and sustainable power generating capability. HHI’s prototype tidal current power system directly connects a tidal turbine, a gearbox and a generator for power transmission. The system can

FEATURE

Solar Power SystemsHHI has a vertically integrated solar power

systems production chain. It has a full range

of solar power products such as polysilicon,

igots/wafers, solar cells, solar modules, and

solar power systems.



operate regardless of current direction using a custom designed turbine system. After completing factory and basin tests last year, the Company successfully produced target power generation from site trials this May. Based on the data collected from the trials, HHI plans to pursue tidal current power farm projects by scaling up power generators. Also this year, HHI broke ground for a new CIGS (copper, indium, gal-lium, selenide) thin film solar module plant together with Saint-Gobain. Hyun-dai-Avancis, a joint venture between the two companies, plans to complete the high-efficiency PV module plant by ear-ly 2012 and start production from the second half of the year. HHI is the only Korean company with a complete solar power production chain. The Company

has a full range of solar power products such as polysilicon, ingots/wafers, solar cells, and solar modules. HHI aims to be a global top 5 CIGS solar module manu-facturer by 2015. HHI is also a strong contender in wind power. The Company produced its first generator for wind turbines in 1988 and has exported transformers and con-vertors to wind power plants in the US and Europe. It is a global leader in the manufacture of generators, transform-ers, and circuit breakers – all core parts of wind power systems. HHI completed Korea’s biggest wind turbine manufactur-ing plant in Gunsan in 2009, producing 600 MW of wind turbines per year. HHI’s commitment to low-carbon green growth is also manifest in its en-vironmental management system. The

Company regularly carries out environ-mental education for its employees and conducts environmental audits to make sure all its factories meet the highest en-vironmental standards. It also runs an emergency response system to prevent environmental pollution and accidents. The Company firmly leads the way through Korea’s greenhouse gas inven-tory. The Company’s efforts at environ-mental protection center around mea-sures to reduce air pollution, manage waste, control water quality, and enhance soil management. As a leader in heavy industry, HHI spares no effort in contri-buting to environmental protection for a sustainable future.

Wind TurbinesHHI produces 1.65 MW and 2.0 MW wind

turbines diversifying the product line to 2.5 MW

and 5.5 MW class onshore and offshore wind

turbines. The Company has an annual capacity

of 600MW in Gunsan, South Korea and is

building a new 600 MW wind turbine plant in

Weihai, China.

HIMSEN H35G Gas EngineThe HiMSEN H35G gas engine has twenty

350 mm cylinders and is rated at 13,600 bhp

(1,000 kW). It can be used for ship propulsion

and power plants. It features “Lean Burn”

technology and fewer parts to increase fuel

efficiency.

Eco-BallastEco-Ballast is a ballast water treatment

system protecting the marine environment

from the transfer of foreign organisms via

ballast water reducing the sediment load and

eco-footprint. It is chemical-free system with

no potential harm to ships or crew.

9-series Construction EquipmentEco friendly models of excavators, forklifts, and

wheel loaders meeting EPA’s Tier 3 regulations

reduce emissions of carbon monoxide and

fine dust by 23 percent, while raising power

generation capacity by 15 percent.

The writer is a journalist based in Seoul.

4 Exhaust Noise

5 Fan Noise

3 Engine Radiated Noise

1 Cabin Noise

2 Hydraulic Noise

TECHNOLOGY

Integrated Noise & Vibration Prediction and Control System for Construction Equipment

By Rick Bush

Welcome to the Global Marketplace

VIEWPOINT

I’ll be the first to admit I can’t keep up with technology, but as an editor, that is

my day job. Because technology changes so quickly, I’m always chasing what’s new. And because energy needs vary, solutions also vary. Some countries are bursting at the seams, investing in generation, trans-mission, and distribution facilities to meet an economy growing at a rate of 7 percent or greater. In mature economies, growth is anemic, but the need for investment is critical as aging infrastructure reaches end of life. I also have difficulty dealing with the combined megatrend and hysteria of smart grids. Predicting the path energy de-livery will take is daunting. But amidst all the things I don’t know, there are a few things of which I am sure.

This I Know Reliable, low-cost energy is vital to a healthy economy. We have to figure out how to meet our future energy needs or risk a global recession - or worse. Earlier this year, I was in India where blackouts are common. This really puts a crimp in business, so most companies have diesel generators so they can back up grid-sup-plied power. India is struggling to address this issue, which is made more challeng-ing by the phenomenal expansion of the industrial sector and the rise of the mid-dle class and their electricity consuming ways. As industries struggle to compete globally, the pressure on utilities to hold down costs and maintain reliability is in-credibly fierce. And because many utili-ties have already had some of their best industrial customers pull up roots and re-locate to more industry-friendly locales, this threat is real. Utilities are responding all around the globe. In India, Nation-al Grid Corporation executives shared their strategy to build a 1,200 kV AC sys-

tem. In fact, the transformers are being wound now. I also visited the state of Ut-tar Pradesh and witnessed the construc-tion of a 765 kV substation being built to bring power from the coal fields in the west to load centers in the east. Manufacturing is increasingly global and local. Vendors are building breakers and transformers in-country to meet lo-cal markets. Within the last 18 months, seven global manufacturers built new transformers, breakers, structures, and underground cable facilities in the Unit-ed States to meet the predicted demand increase as utilities invest in new trans-mission and refurbish their transmission & distribution systems. It is increasingly difficult for any manufacturer to protect its local markets while simultaneously ex-panding its international business. The move to a low carbon future is gaining momentum. You might remem-ber that in July 2009, the leaders of the European Union and the G8 announced an objective to reduce greenhouse gas emissions by at least 80 percent below 1990 levels by 2050. In support of this goal, the European Climate Foundation performed a study to establish a fact base and to evaluate implications for Europe-an industry, focusing particularly on the electricity sector. We would have to take almost all of the carbon out of the power sector to hit these targets. On the genera-tion side, this would require wind pow-er from the Baltics, solar power from the Sahara and pumped hydro (now being built) in the Alps. But it also would re-quire up to three times as much transmis-sion to store and transport low-availabili-ty wind and solar.

So What am I Unsure Of?The future of nuclear is cloudy to me. The

damage to the Fukushima Daiichi nucle-ar facility by the massive earthquake that hit Japan is still causing reverberations worldwide. That said, the latest-genera-tion, inherently safe nuclear technologies are available and reliable. And within the next decade, our industry will have ac-cess to modular nuclear facilities in the 30 MW to 300 MW range, based loosely on designs that operate safely in nuclear sub-marines and aircraft carriers. I am unsure of the long-term poten-tial for hydrogen-based economy. We re-ally need a low-cost technique to convert water into hydrogen and oxygen using electricity gained from utility-scale wind and solar power plants. If we can pull this off - and scientists at Massachusetts Institute of Technology are working on it – we could figure out how to store and transport hydrogen. We already have methods to convert hydrogen back to electricity, whether we burn the hydro-gen in turbines or convert it back to elec-tricity using fuel cells.

Where Does This Leave Us? Regardless of whether we see clearly or not, we must prepare to meet future elec-tricity needs. This requires a truly global effort from our universities, regulatory bodies, and government funding agen-cies. But it is our electric utilities and the vendor community that stand on the front lines. With the threat of glob-al warming and the inevitable escalation in the cost of fossil fuels, we now have the motives and must ultimately gain the means to get our energy act together. I am so excited that I am working in the electric power industry today and have the opportunity to take part in this global energy transformation.

With interest for environmental-ly friendly construction equip-

ment growing, there is a concomitant demand increase for low noise/low vi-bration equipment. Going forward, we will see this trend expanding as the Euro-pean Union continues to reinforce noise regulations to protect the environment, human health, and wellbeing. Hyundai Maritime Research Institute (HMRI) is adapting knowledge gained in various industries to design construction equip-ment that satisfies both noise regulations and client needs. There are many noise sources in construction equipment; the diesel en-gine, the exhaust muffler, the cooling fan, the hydraulic pump. As the sources are myriad, accurately predicting exteri-or and interior noise levels in the design stage is extremely difficult. To address this issue, HMRI's Noise Reduction Re-search Team developed a new method to predict and control the noise and vibra-tion levels of the equipment in the design stage. The result of this research is the Integrated Noise and Vibration Predic-tion and Control System for Construction Equipment. The Integrated Noise & Vibration

Prediction and Control System for Con-struction Equipment consists of:

The Prediction System

- Exterior noise was calculated based on the acoustic energy conservation concept and the measurement database and cab-in noise was predicted using 3-D FEM & BEM analysis. The sound transmission loss of the engine room and sound atten-uation by distance were also considered. The prediction results were all within an allowable margin of error of 2 dB.The Control System

- The exhaust muffler noise was con-trolled using an in-house program. An in-house program was developed to ana-lyze the noise reduction properties based on basic duct acoustics. The program also considered the complicated flow noise ef-fect and high order mode effect. - With cooling fan noise, CFD analy-sis (SC/TETRA) and flow noise analy-sis (FlowNoise) were conducted. It was possible to decide on the optimal dimen-sions, layout, and other parameters of the cooling system. - For engine vibration and noise, an in-house program was applied to decide the optimal type and installation locations of

the engine-mount. - The noise from the hydraulic pump was calculated using the AMESim software and controlled by applying the hydraulic resonator.- Cabin noise was minimized through the review of the analysis results (Nastran/Virtual. Lab) considering the effect of the structural-acoustic coupling and the ap-propriate countermeasures were imple-mented to reduce noise and to optimize noise transmission paths.- These kinds of control systems made it possible to calculate the quantitative ef-fect of noise reduction, and to minimize the exterior and cabin noise successfully.Both prediction and control method were accomplished based on virtual engineer-ing using CAE.

The system we developed was suc-cessfully applied in the development of the new series of construction equipment. This system allowed designers in the de-sign stage to predict the acoustic char-acteristics of each noise source and the quantitative effect according to the de-sign modification and also made it pos-sible to save time in the development of the equipment.



The writer is an editor of Transmission & Distribution World.

Four decades ago, he was just a 17-year-old high school graduate who

had never seen a ship, let alone the sea. Mr. Kim Oi-hyun, now in charge of the world's No. 1 shipbuilder's shipbuilding division, got his start in 1975 at age 21. He studied naval architecture and ocean engi-neering at Seoul National University. "I was overwhelmed by the size of the ships and didn't hesitate to apply for the department" said the 57-year-old. No doubt, he chose Hyundai Heavy Indus-tries as his first job even before his gradu-ation from the state-run university. It took only a decade for the Ulsan-based shipyard to rise from humble begin-nings to the top of the shipbuilding world under the late founder Chung Ju-yung's motto of "make something out of nothing." Mr. Kim’s goal for the next decade is to make HHI “a great shipyard unri-valed in the industry.” To that end, HHI needs to continue investments in facili-ties, talent, and most of all, keep employ-ee mind-set on alert to constantly chal-lenge the status quo. As part of such efforts, Mr. Kim met 3,900 team leaders last year when the shipbuilding industry was still reeling from the financial crisis. In June alone this year, he had three rounds of meet-ings with 500 leaders to explain where the company stands and how to contin-ue growth. Every week, he even makes a surprise visit to yard workers with a pack of beverages to listen to what difficulties they have during their work. "Yard workers didn't recognize me last year when I walked around the yard in a company jacket but now we say hel-lo to each other after rounds of such in-teractions," he said. "It helps boost the morale of the workers." He was named co-chief executive officer in January.

In addition to this approach toward employees, Mr. Kim sticks to principles to stay fair and transparent not only to him-self but also to junior colleagues. "Com-promising on principles often leads to wrong decisions and it may ruin the cor-nerstone of the company from the root." As priorities for this year, Mr. Kim set the goal of 110 ships for on-time de-livery, a record-high figure since the Company was founded in 1972. He also stressed preparations for changing mix-ture of ship orders over the next three years. Shippers are placing more orders for drillships and LNG ships instead of oil tankers and container carriers because higher oil prices are buoying demand for drill ships, while the March earthquake and tsunami that hit nuclear power plants in northeast Japan are boosting orders for LNG carriers. Faced with higher demand for spe-cial-purpose ships, the Company will re-organize its shipyards, which have been dominated by commercial ships such as containerships and oil tankers, to allocate more space for electronics, plumbing, and control equipment used in drill ships and LNG ships. In the shipbuilding division, HHI exceeded the annual order goal of USD 7.47 billion by 10 percent, receiving USD 8.24 billion in the first half, backed by drillships and LNG carriers. Better still, HHI is in talks with clients on options to build ships, including drillships, contain-erships, and LNG carriers. "As we have seen before, optional orders usually turn into final contracts," he said. But HHI, which purchases more than 2.5 million metric tons of thick steel plates a year, faces higher prices of the key raw material and a strong won which drives down dollar-denominated order

income when converted into the local currency. "There's not much we can do about the ever-rising input costs. What we need to do is continue our focus on cost, productivity improvement, and high-end ships," Mr. Kim said. He said if steel plate prices continue to rise, the Company may consider pur-chasing more plates from China. It cur-rently buys more than 50 percent of the plates from domestic suppliers and the remainder from Japan and China. Looking back on his early years in HHI's design office, Mr. Kim said he didn't have any role model to follow or seniors to learn from because the Com-pany was only just starting out in the shipbuilding business. "I taught myself from the process by the classification so-cieties to approve floor plans (drawn up by HHI) and through documents I got from my colleagues who studied abroad." He was mainly responsible for de-signing the hull structure of ships for more than three decades. As the manufacture of ships has something to do with designing and re-search & development, Mr. Kim’s experi-ence has helped bridge the gap between the manufacturing departments and de-sign and R&D centers. "In particular, R&D centers play a pivotal role in improving productivity and developing new technologies and new types of vessels." Mr. Kim said. "Any advice from researchers on shipbuilding is immediately available due to a close relationship with them." This clearly shows the combination of software and hardware has made HHI what it is. All eyes are on what steps HHI and Mr. Kim will take to make fur-ther advances.

PEOPLE

Newly appointed to the top job,

Mr. Kim Oi-hyun is using his vast experience

in the industry to focus on principled recovery.Revving Up Recovery on PrinciplesBy Grace Choi

The writer is a journalist based in Seoul.Mr. Kim Oi-hyun Senior Executive Vice President, COO of Shipbuilding Division and CEO



Strong Belief Leads to New Growth

PEOPLE

By George Deftereos

Fresh from

the Deepsea Metro I, Craig Riddell and

the Deep Sea Metro team

are putting the finishing

touches on

the Deepsea Metro II

Hyundai Heavy Industries’ founder ‘Asan’ Chung Ju-yung built his busi-

ness empire on the trust and confidence of his clients. Even before he had built his shipyard, Asan was able to secure an or-der for two ships and funding to build the shipyard. This spirit continues to drive the Company he founded into new business areas such as drillships. Parallel to the foundation myth, Hyundai Heavy Industries won an order for two drillships from the Metrostar/Od-fjell Drilling joint venture, known as Deep Sea Metro, before finishing the first drill-ship, Deepwater Champion. Mr. Craig Rid-dell, site manager of the Deepsea Met-ro Drillships Project, says the industry’s strong belief in HHI’s building quality is one of the reasons his company had the confidence to work with Hyundai Heavy Industries, despite a lack of experience in building these specialized vessels. Mr. Riddell heads the team building the Deepsea Metro II drillship. A veteran of the industry, he has worked in the UK, Canada, Azerbaijan, Australia, and most recently in South Korea. He was also the project manager for the Deepsea Metro I drillship, the delivery of which he holds as one of his most memorable experienc-es in Korea so far. Mr. Riddell has worked in Korea since 2007, initially at Sam-sung Heavy Industries for two semi sub-mersibles prior to moving to HHI for the Deepsea Metro drillships in early 2009. Previously he had worked in Baku, Azer-baijan on the construction & commission-ing of three production platforms for BP. Deepsea Metro I was the fourth “deliv-ery” for Mr. Riddell since arriving at HHI. His daughter was born in March 2009 and

his twin sons born in May 2011. Mr. Rid-dell notes that Korea is a very safe, friend-ly, and respectful country to bring up a family. This experience has rubbed off on his daughter who bows in thanks when re-ceiving something. Deepsea Metro II is being built to the Gusto P10000 design. The layout of the vessel has had a lot of operational thought put into it and Mr. Riddell says the market sees this kind of vessel as one of the best designs produced by the shipyards. The drillship measures 230 m bow to stern and features a 64 m high dual derrick. It is also fitted with a main work center and an auxiliary work center to fa-cilitate simultaneous drilling operations (while drilling on the main well center, drillpipe or completions can be built on the auxiliary well center thereby maxi-mizing the main well operations). As with other drillships built by HHI, the Deep-sea Metro II has a thruster canister to save time in maintenance. A thruster canister is housing for the ship’s thrusters. The thrusters help keep the ship in position while it is drilling. Unlike other drillships, canister equipped ships do not need to be drydocked for maintenance as the thrust-ers can be lifted up unto the deck when work needs to be carried out. With any project of this magnitude there were various challenges to over-come, ranging from technical to cross-cultural. As the drillship is being built in the Shipbuilding Division, a paradigm shift was needed in terms of quality stan-dards. Whereas commercial ships simply sail from one point to another, drillships and other offshore vessels need to be on location for extended periods of time.

This can be likened to a company mak-ing both tyres for farm vehicles and tyres to be used in Formula One cars; a differ-ent set of guidelines is required depend-ing on the tyre’s intended use. Therefore, HHI’s workforce had to adjust to the dif-ferent quality standards. Mr. Riddell says, “The best way to overcome this challenge was to reject all inspections until the quality was up to the correct standard. We held our ground, and the workforce, to give them their due, came forward and learnt from that experience.” In the industry, a checklist is used for inspections and any quality shortfalls, or ‘punches’, are checked and addressed. With the first drillship, the number of punches was over 10,000 (the industry average is about 10,000 punches). Be-cause of the continuity of the personnel from the first drillship and the experience gained from the first drillship, quality shortfalls are less of a problem with the second vessel. The number of punches for the Deepsea Metro II has been reduced to between 3000 and 4000. As to the future, there is an imme-diate demand for drillships especially in South America. Brazilian major Petro-bras is trying to initiate its own building programme in Brazil. In the short term, there is a need of vessels to make up the gap. When completed, Deepsea Metro II will sail out to Brazil for its first opera-tion. Looking to the horizon, oil pric-es will continue to rise on geopolitical strains and increasing demand in devel-oping economies. It seems the need for more drillships to tap new resources has a long way to go before it is met. Mr. Craig Riddell Site Manager, Deepsea Metro Drillships Project



Driving 40 minutes from Manama, the capital of Bahrain, huge industri-

al plants rise up out of the desert. Hyundai Heavy Industries is currently commission-ing the power and desalination plants af-ter completing all installation works over the last thirty-two months. “The Al Dur Independent Power & Desalination Plant Project in Bahrain is worth USD 1.7 billion and it takes about 32 months to complete. This is really one of the largest power plant projects we have been involved in,” said Mr. Lee Kyou-sik, HHI project director of Al Dur Project. HHI’s Industrial Plant & Engineer-ing Division completed this project as the sole EPC contractor providing engineer-ing, procurement, manufacturing, and commissioning for the gas/oil-fired com-bined-cycle power and desalination plant. GDF SUEZ Energy International devel-

oped the project to build, own, and oper-ate this plant in a consortium with Gulf In-vestment Corporation where GDF SUEZ holds a 51 percent stake. Bahrain’s Elec-tricity & Water Authority is the sole off-taker of the plant output in the 20-year power and water purchase agreement.

Gas-fired Combined-cyclePower PlantThe Al Dur Power Plant comprises four 225 MW gas turbines, two 250 MW steam turbines, and four heat recovery steam generators (HRSG). It supplies 1,245 MW of electricity to Bahrain and other coun-tries of the Gulf Cooperation Council. This power plant has combined cycle for generating electricity. Natural gas goes into a gas turbine and drives it to produce electricity. In this process, much of the gas is lost as waste heat. HRSG captures this heat to power a steam turbine.

Global HHI

Al Dur Power & Desalination Plant Project: New Challenge forIndustrial Plant Projects


Map of Bahrain

HHI’s Al Dur Power & Desalination Project

powers up HHI’s presence as an leading EPC contractor

in the industrial plant sector.

Al Dur

Awali

Isa Town Sitra

ManamaMuharraq

Hawar

Budaiya

Global HHI

The first phase of the project carried out commercial operation in May 2010 and the second phase is scheduled to en-ter full operation by September 2011. “Our strengths lie in integrated project management systems accumulated from rich performance experiences in the Middle East industrial plant sector. Espe-cially, using our three-dimensional mo-deling, we can minimize trial and error on construction sites in the planning stage,” said Mr. Lee. The Al Dur Power Plant will almost double Bahrain’s current installed power capacity and provide electricity for the new industrial areas planned by the go-vernment. It is also the first Gulf Coop-eration Council long-term project that links Kuwait, Saudi Arabia, Bahrain, and Qatar in a GCC power grid and helps to ease power shortages in those countries during the peak summer time.

World’s Largest RO Type Desalina-tion PlantThe Al Dur Desalination Plant is a new challenge for HHI’s Industrial Plant & Engineering Division. The plant ad-opted a completely different type of desalination: reverse osmosis (RO) method, instead of conventional distil-lation types. “This is our first attempt to build a RO desalination plant on such a large scale,” said Mr. Lee. RO plants are more cost effective because they do not need fuel to evaporate the sea-water. “This will be the world’s largest RO-type desalination plant, producing 220,000 tons of water a day.” The Al Dur Desalination Plant takes in seawater 1.5 kilometers away from the shore. The seawater is pre-treated through the Dissolved Air Floatation (DAF), Dual Media Filter (DMF), and Cartridge Filter. This salty water goes into the RO Mem-

brane System where it is separated into pure water and brine under high pressure. Finally, in the Chemical Building, pure water finally turns into potable water by adding some chemicals and minerals such as lime, CO2, chlorine, etc.

Transportation of Main EquipmentIn plant construction, it is foremost to meet the construction schedule by install-ing all equipment and facilities on time. The Project Team faced a big challenge in transporting main equipment such as turbines and HRSG. It was the original scheme that these units would be trans-ported by road from the port of Bahrain. However, the gas turbines weigh over 300 tons each, while the road was limited to a weight of 80 tons. The Project Team decided to trans-port main equipment by sea. The engi-neers came up with the idea to build a



jetty on the side of the construction site. At that time, the Project Team was mak-ing the working road to install the sea-water intake pipes of the desalination plant. They reinforced the road and ex-panded the jetty adjacent to the road to accommodate barges for heavy equip-ment. “With this breakthrough, we can save our transportation cost, shorten the construction time, and cut our mainte-nance cost for roads and bridges asso-ciated with on-land transportation. We learnt that originality of an idea can pave a great momentum for success,” said Mr. Lee.

Safety Initiative for 24 Million No-Accident Man HoursThe Al Dur Project Team left a great record of achievements in the field of health, environment, and safety. The Project Team achieved 24 million no-

accident man hours in this project. Ms. Honeye Ebrahimi, HSE officer of Al Dur Power & Water Company said, “It’s an amazing record. It’s a really monumental record to go with no safety accidents in this large-scale project.” One of the biggest challenges in the construction site is that the team should manage workers from many different countries. Such diversity can hamper ac-curate communications and cause cul-tural conflicts among the project team, leading to critical safety concerns and weakening work efficiency. From the start, the Project Team converged all levels of work into a single safety framework. “My work here always begins with a daily safety meeting with safety representatives from the owner and subcontractors,” said Mr. Lee. Every day he conducts safety patrol throughout the construction site, uncovering working

practices that may lead to accidents and work-related illness, and then reporting so they can be corrected. “Our principle is that all work will be suspended until the safety concerns are addressed. That’s the best way to stick to the construction schedule.” In 2008 when the project was at the bidding stage, the global financial crisis broke and the project was up in the air. Under the uncertain situation, the Proj-ect Team has been committed to study-ing project management and maintaining the relationship with subcontractors. Mr. Lee reminisced, “We can find some op-portunities in times of crisis. During this time, we could be well prepared for the project. That’s the key to our success in the project.” Turning crisis into an oppor-tunity, the Al Dur Project Team is break-ing new ground in the power and desali-nation plant.

HHI GROUP



How Hyundai Samho Heavy Industries came to be

a leader in global shipbuilding

Hyundai Samho Heavy Industries (HSHI), located in the south west-

ern part of Korea, began its eye-opening journey to becoming the fourth biggest shipyard in the world with the delivery of its first ship in 1996. Then known as Halla Heavy Industries, the shipyard went bankrupt following the Asian Financial Crisis in 1997 and was ac-

quired by Hyundai Heavy Industries in 2002. HHI was in charge of consignment management from 1999. Based on the management know-how of the world’s No. 1 shipbuilder and its extensive global sales network, the consignment manage-ment team staged a strong comeback by winning orders for 70 ships within a short time. For the first time since consignment

management began, the shipyard realized a net income of USD 70 million in 2001. In July 2002, Halla Heavy Indus-tries became an affiliate of HHI and was renamed Hyundai Samho Heavy Indus-tries in 2003. Presently, HSHI builds more than 50 vessels a year and also pro-duces about 30 industrial cranes of differ-ent usages annually.

Hyundai Samho Heavy Industries

Shipbuilding & Offshore FacilitiesStretching over 3.3 million square meters, HSHI possesses two dry docks (598m x 104m, 504m x 100m) and six Goli-ath cranes with lifting capacities ranging from 600 tons to 1,200 tons. The ship-yard also boasts the 3.35 km long quay and on-land construction facilities capa-ble of building twelve 165,000 DWT-class ships a year. HSHI has built different types of ships such as bulkers, tankers, VLCCs, ultra-large containerships, LNG carriers, LPG carriers, and car carriers. The ship-yard also signed a joint building contract with HHI for Akpo FPSO in 2005 and successfully constructed its hull struc-ture of it. In addition, HSHI has sup-plied jackets and piles for Ieodo Ocean Research Station and is planning to ex-pand its scope of business to high-tech offshore structures such as onshore and offshore modules. Having won the order to construct a drillship which can drill at a depth of 12,000 feet, Hyundai Samho is stepping up its efforts to diversify its busi-ness areas. Hyundai Samho Heavy Industries prides itself on its excellent workforce and state-of-the-art facilities. A team of 670 designers tailor ships to owners’ re-quirements. The highly skilled work-force has achieved national and in-ternational certificates such as Master Craftsman Welding, FROSIO (Coat-ing Inspector), and NACE (Coating In-spector, Cathodic Protection). The Go-liath cranes can also be used in tandem to assemble mega-blocks weighing up to 1,720 tons. All these come together at HSHI to increase productivity and streamline efficiency. HSHI has strengthened its position as a “Digital Shipbuilder” by establishing the three-dimensional design system, au-tomation robot and computer-integrated production system. This shipyard has improved the ef-ficiency of the construction process by appropriate allocation of the processes

in accordance with the logistics flow and also by minimizing unnecessary move-ment of equipment. HSHI’s location also remains unaffected by natural disasters such as typhoons as it is surrounded by is-lands and small peninsulas which serve as natural sea walls. HSHI jointly operates sales, R&D, design, and purchase activities with HHI. Through its own strengths and the syn-ergies that come from the joint opera-tion with HHI, HSHI has demonstrated an average annual growth of 19 percent since 2003.

Industrial Plant & CraneWith over 30 years’ experience in con-tainer handling cranes, industrial cranes, and bulk handling systems, HHI’s In-dustrial Plant & Crane Department was transferred to HSHI in 2004 to stream-line operations. Equipped with vast assembly spaces and quays, Goliath cranes, and also with the facilities to produce excellent-quality crane and industrial plant, HSHI has im-plemented the “Total Engineering System” that encompasses the entire construction processes; design, fabrication, transporta-tion, installation and commissioning, to provide facilities tailored to clients’ needs. Supplying cranes and bulk handling

systems to ports, terminals, and power plants all over the world, HSHI has been expanding its business into wide range of industrial plant. HSHI has displayed its competitiveness and expertise in the industrial plant arena by winning the Panama Third Set of Locks Valve & Ap-purtenances Project worth USD 190 mil-lion from the multi-national consortium GUPC in August 2010.

Relentless Drive for Sustainable GrowthHyundai Samho Heavy Industries deli-vered about 410 ships between 1996 and 2010. This year, HSHI aims to deliver 56 ships, the most ships in the compa-ny’s history. Building on the expansion of the offshore facilities business through the first drillship order, Hyundai Samho plans to boost its sales from USD 4.12 bil-lion in 2010 to USD 6.5 billion by 2015. H S H I, as a holder of the I SO 9001:2008, ISO 14001, OHSAS (Occupa-tional Health & Safety Assessment Series) 18001 presents clients satisfaction and trust. The reliable quality assurance pol-icy from the design stage, world-beating after-sales service, highly efficient ships, and environmentally friendly construc-tion technologies all ensure HSHI will continue to grow.

FINANCIAL NEWS

Expecting More in the Future

Second Quarter 2011Hyundai Heavy Industries achieved sales of KRW 6.1 trillion in the second quarter ended June 30, up 14.6 percent from the same period last year. As the Shipbuilding Division in-creased its output building more vessels, sales jumped 23.6 percent to KRW 2.3 trillion. The Engine & Machinery Divi-sion’s sales also increased by 18 percent on ship engines and exports of HiMSEN 4-stroke engines for diesel power plants. New projects for power plants saw the Industrial Plant & Engineering Divi-sion boost its contribution to the Compa-ny’s sales. The division recorded sales of KRW 670.2 billion in the second quarter, up 32.1 percent year-on-year. Buoyed by demand for construction equipment in America and emerging markets, the Con-struction Equipment Division’s sales in-

creased 33 percent, posting KRW 847.2 billion. HHI marked operating profit in the second quarter as KRW 667.0 billion, down 10.0 percent from a year earlier. Even though the Green Energy Division and the Construction Equipment Divi-sion contribute more operating profit, increased price of steel plates hurt Ship-building and Engine & Machinery’s per-formance. Net profit for the quarter de-clined 16.5 percent to KRW 538.8 billion from KRW 645.4 billion year-on-year. This is due to a decrease in operating profit and non-operating income.

New Orders in the First HalfHHI received USD 18.1 billion in new orders, achieving 68.1 percent of the an-nual goal of USD 26.6 billion in the first six months. Higher energy prices have

prompted oil majors and deep-sea ex-plorers to invest in drilling ships and other offshore oil and gas production fa-cilities, which in turn brings more new orders for Shipbuilding and Offshore & Engineering divisions. On the back of brisk ordering for drillships, LNG carriers, and super-large containerships, the Shipbuilding Divi-sion has already taken in USD 8.5 bil-lion in orders for the first half, well above the annual goal of USD 7.5 billion. The division received orders for 9 drillships, 18 containerships, 3 tankers, 4 LNG car-riers, 3 LPG carriers, 1 pure car & truck carrier, and 2 special & naval ships. Hyundai Heavy Industries has an or-der backlog worth USD 54.0 billion in the delivery basis at the end of June. The Ship-building Division’s order backlog is USD 23.1 billion, enough to work for two years.

Business Performance

2Q 1Q QoQ 2Q YoY 2011 2011 (%) 2010 (%)

Sales Quarter 6,055.3 6,306.3 -3.98 5,283.5 14.61

Total 12,361.6 6,306.3 - 10,677.0 15.78

Operating Income Quarter 677.0 991.8 -31.74 752.2 -10.00

Total 1,668.8 991.8 - 1,651.1 1.07

Net Income Quarter 538.8 903.0 -40.33 645.4 -16.52

Total 1,441.8 903.0 - 1,390.7 3.67

(unit: KRW billion)

Divisions 2011 2011 2010 Achievement YoY Backlog

Plan JUN. (YTD) JUN. (YTD) (%) (%) (Delivery basis)

Shipbuilding 7,472 8,520 1,644 114.0% 418.2% 23,103

Offshore & Engineering 4,800 3,225 2,659 67.2% 21.3% 14,575

Industrial Plant & Engineering 3,800 813 1,825 21.4% -55.5% 7,719

Engine & Machinery 3,220 2,168 851 67.3% 154.8% 5,123

Electro Electric Systems 3,714 1,588 1,621 42.8% -2.0% 3,081

Green Energy 1,286 235 359 18.3% -34.5% 370

Construction Equipment 2,343 1,581 1,028 67.5% 53.8% -

Total 26,635 18,130 9,987 68.1% 81.5% 53,971

New Orders & Backlog(unit: USD million)

Jul. 14, 2008 2009 2010 2011

High for the year (Closing, KRW) 438,000 250,000 456,500 547,000

Low for the year (Closing, KRW) 115,500 148,500 171,000 415,000

Closing, KRW 199,500 173,500 443,000 459,000

Market Cap. (Closing, KRW billion) 15,162 13,186 33,668 34,884

Foreign Ownership (%) 14.80 17.38 20.20 20.14

PER (H/L) 11.0/2.8 7.0/4.2 7.4/2.8 N/A

EPS (KRW) 37,340 35,705 61,807 N/A

Stock Metrics

The Offshore & Engineering Divi-sion received orders worth USD 3.2 bil-lion fulfilling 67.2 percent of its year tar-get of USD 4.8 billion. The division’s new order target is the highest in its his-tory. The Industrial Plant & Engine di-vision won USD 813 million in the first half. The two divisions expect to achieve their new order targets as they are partic-ipating in the bids for large size projects in Africa, Australia, and the Middle East. Following the recovery in ship orders, or-ders for marine engines have increased. The Engine & Machinery Division has taken USD 2.2 billion in new orders, ac-counting for 67.3 percent of the annual goal. The division has been receiving or-ders for marine engine from not only Ko-rean shipbuilders, but also Chinese and Japanese shipbuilders. The Construction Equipment Divi-

sion posted new orders worth USD 1.6 billion, making 67.5 percent of their an-nual new orders goal. This result can be attributed to the recovery in the Ameri-can construction industry. On the other hand, the Green En-ergy Division’s new orders decreased to USD 235 million from USD 359 the year earlier. These results are in line with the reduction of support in European countries for renewable energy.

Changes for ChallengesHyundai Heavy Industries has the abil-ity to meet various challenges in the mar-ket. The Shipbuilding Division added high value-added ships such as drillships and LNG Floating Storage Regasifica-tion Units (see p15) to its product mix to head off market changes. The Offshore & Engineering Division also expanded

its business scope to LNG FPSO, subsea systems, and offshore wind turbines to cover all offshore facilities. The Industrial Plant & Engineering Division is diversify-ing its business to BTX plants producing high value-added petrochemicals such as benzene, toluene, and p-xylene. The En-gine & Machinery Division continues to strengthen its base with industrial robots, industrial pumps, packaged power sta-tions, and diesel power plants. The Elec-tro Electric Systems Division plans to build a GIS plant in Vladivostok to meet Russian demand. The Green Energy Di-vision is developing tidal power plants as the new resource of clean and renewable energy. The Construction Equipment Di-vision is launching new models such as 120-ton excavator (see p14), and order pickers, diversifying its model line up to support different market needs.



3,000

2,600

2,200

1,800

1,400

1,000

550,000

450,000

350,000

250,000

150,000

Apr. 2010 Sep.2010

Stock Performance— KOSPI (Right, Point)

Feb.2011 Jul. 2011

— HHI (Left, KRW)

USD Exchange RateSource : KEB

KRW

1,150

1,130

1,110

1,090

1,070

1,050

Date Jul.1Mar.2 Apr.1 May.2 Jun.1

One of the common beliefs of equi-ty investors is that Hyundai Heavy

Industries' share price performance could be better than other Korean shipbuilders during an industry downturn due to its well-diversified business portfolio, while it may underperform its peers during an industry upturn. However, we believe HHI should be the key holding stock for investors regardless of the industry cycle because of its advanced technology and prudent order-taking activities. Among the Korean shipbuilders, the first new order news in 2011 came from HHI - a USD 520 million order to build an ultra-deepwater drillship for Diamond Offshore Drilling. At that time, we did not expect HHI to enjoy such strong new order flows in the first half of 2011. As of end-2010, HHI had secured 19.1 mil-lion GT backlog with annual shipbuild-ing sales of KRW 12 trillion (including offshore). We believe the flexible order mix change should show HHI's prudent order-taking activity along with adjusting order amounts depending on the cycle. The lower backlog indicates HHI had not been aggressive in taking new or-ders during 2009/2010 when the overall shipbuilding industry cycle was poor and new vessel price was not high enough to generate healthy margins. As a result, HHI was able to provide early delivery and take more orders than other ship-yards in the first six months of 2011. Fur-thermore, HHI will be able to generate better margins going forward given bet-ter profitability from new orders taken in

the first half this year compared to new orders in 2009/2010, in our view. As HHI has been diversifying its business portfolio into non-shipbuilding areas for a long time, its operating mar-gin has stabilized at an early-teen level since 2007. We expect HHI to maintain its stable margin structure going forward, and it can post even better operating margin in future (over 13 percent operat-ing margin from 2010 vs. 10-11 percent from 2007 to 2009), thanks to improved execution ability in non-shipbuilding di-visions despite the weaker margin out-look of the shipbuilding industry. We also highlight HHI's solid per-formance in non-shipbuilding areas such as construction equipment, electro elec-tric systems, and green energy. China is the biggest market for construction equipment globally (especially in hydrau-lic excavators) due to massive demand from construction and infrastructure in-vestment, which has been posting a hy-per growth rate in the past few years. Given the importance of the market, the overall competition level has heightened recently among foreign makers and Chi-nese local makers. Amid keen competi-tion, HHI is well sustaining its superior market position (No.2 market share in 2011 YTD) thanks to its product competi-tiveness, well-localized sales network and production line, and aggressive market-ing strategy to extend its customer base. We believe HHI will maintain its top-tier position in China despite the surge in Chinese local companies. We also be-

lieve HHI can duplicate its China suc-cess story in other emerging countries such as Brazil, India, and Russia, thanks to its winning strategy and product com-petitiveness. Meanwhile, we also believe HHI's electricity-related businesses are long-term promising given the bright industry outlook. The International Energy As-sociation forecasts transmission & distri-bution investment will be USD 6.6 tril-lion (USD 286 billion per annum) from 2008 to 2030, accounting for 26 percent of global electricity investment. This is the second largest sector after power gen-eration. Accordingly, we believe HHI's electro electric systems business should be the beneficiary given this growth sto-ry. The IEA also expects renewable gen-eration to account for 17 percent of total power generation in 2030 (3 percent as of 2009). So HHI's preemptive invest-ment in renewable energy will also se-cure the company's future growth antici-pating gradual expansion of solar and wind power generation going forward. We like HHI the most among the ship-building companies under our coverage not only due to its stable growth outlook but also because of its cheap valuation. Although pure implied price-to-book val-uation suggests the highest upside among Korean shipbuilding names, we should apply a valuation premium to HHI given its solid earnings profile and valuable in-vestment assets.

ANALYST REPORT

Best Bet in Korean Shipbuilder

The writer is an analyst based in Seoul.

By ES Lee

F1 Korean Grand Prix | The roar of the engines and the thrill of the speeds. It’s pure racing excitement, born from the rich tra-ditions of sixty years of racing history and the most cutting edge automotive technology on the planet. In the end, it all comes down to 55 laps and 90 minutes of heart stopping action at the Korean Grand Prix.


Shipbuilding Offshore & Engineering Industrial Plant & Engineering Engine & Machinery

Electro Electric Systems Green Energy Construction Equipment Others

2005Shipbuilding / Engine 66%10,345bil.KRW of total sales

2011(E)Shipbuilding / Engine 47%26,945 bil.KRW of total sales (Non-Consolidated Sales basis)

35

1411

12

13

410

1

5616

7

10

91 1

Business Portfolio

One Intense WeekIt’s a sport that truly spans the globe: nineteen races in as many countries tak-ing place over the course of an 8-month season. Each race comprises an intense week of activities, as the teams struggle with the logistical nightmare of travelling and transporting tons of gear and hun-dreds of people around the world for ev-ery race. All of the hard work eventually boils down to three days of practice and qualifying, further distilled into 90 min-utes of hard racing at speeds averaging over 200 km/h. All teams have simula-tors these days but there is no substitute for the real thing and many drivers be-gin by actually walking the track to get a sense of the twists and turns. With the all-important qualifying sessions complete, and each team assigned their spot on the grid based on their qualifying times, ev-erything is finally ready. Positioning and performance at the start is crucial but, in reality, anything can happen.

About the F1Established in 1950, F1 is formally known as the FIA Formula One World Championship. Over the last 60 years, it has evolved into one of the sporting world’s great spectacles. F1 represents the highest category of single seat rac-ing sanctioned by its governing body, the FIA. Only the FIFA World Cup and the Olympics compete with F1 in terms of total viewership, as the sport boasts large fan bases in many different coun-tries around the globe. Each calendar year comprises a series of races known as Grand Prix held on either closed circuits or private roads. Race results are trans-lated to a point system, which filters into driver and constructor standings used to crown to annual World Champion. The machines themselves are finely tuned to reach speeds of up to 360 km/h and, to achieve that, each team becomes a road-show of highly paid drivers, engineers, strategists, and support staff. With billions of dollars in revenue and marketing to be had, big sponsors line up to take part.

2010 Korea Grand PrixSome Koreans dreamed for years of host-ing the magic of F1. After a long wait, 12 teams and 24 precision machines touched down in 2010 and headed south to the Korea International Circuit in Yeongam. Intrepid fans made the trek down as well, filling the 100,000 person capacity stands to take in both the qualifying and the ac-tual race, in which those 12 elite drivers made 55 turns around the newly built 5.21 km circuit. After a bit of a soggy start to the day, the race finally got under-way and it was a great one full of drama. From the start, drivers reported not be-ing able to see each other in the mist, and several top cars were knocked out. In the end, after several accidents and spinouts on the wet track, Spain’s Fernando Alon-so took top spot on the podium, followed by Lewis Hamilton and Felipe Massa.

Korea’s First International CircuitThe amazing thing about Yeongam, lo-cated near the bustling Mokpo seaport, is that it barely existed before track construc-

KOREAN PANORAMAKOREAN PANORAMA



Formula One racing is the pinnacle of motorsports, loved and watched by hundreds of millions of spectators each year around the world. In its inaugural 1950 season, there were but 7 races on the calendar. That number has now nearly tripled, with 19 races, including the South Korean Grand Prix, on the 2011 schedule. The Korean Grand Prix was initiated into the sport last year, and the second iteration this year promises to be even better than the first.

Venue Korea International Circuit

in Yeongam, Jeollanamdo

Date October 14 (FRI) -

16 (SUN), 2011

Schedule October 14 (FRI)

• Practice1(10:00-11:30)

• Practice2(14:00-15:30)

October 15 (SAT)

• Practice3(11:00-12:00)

• Qualifying(14:00-15:00)

October 16 (SUN)

• FinalRace(from15:00)

website www.koreangp.kr

2011 Korea Grand Prix

KOREAN PANORAMA

tion began. One year later and one race in the books, the Korea International Cir-cuit is the central focus in Jeollanamdo's tourism, leisure, and business develop-ment. Boasting panoramic views of Yeon-gam Lake and the Yellow Sea, the circuit is now a top attraction and a milestone for Korean motorsports. Designed by famed engineer and former driver Hermann Til-ke, the track also incorporates Korean ele-ments, particularly the grandstand which uses themes found in traditional Kore-an houses, Hanok. The track was built to strict FIA Grade A standards, and the cir-cuit is actually two courses in one, with a 3.045 km permanent track augmented for the F1 race to total 5.615 km. One part of the track runs along the water and is de-signed to give great race views to anyone taking in the action from their yacht. At one point, the track straightens out to 1.2 km, the longest straight of any current F1 circuits, a fact that makes the KIC stand out from other tracks. Another interest-ing fact is that the circuit is designed to run counter-clockwise, while most courses are designed to run the opposite way. In recent years, overtaking during F1 races has declined, as technology has taken on

more of an important role. The KIC was designed to reinsert the element of sur-prise and drama with several places along the track where overtaking is possible.

Upcoming 2011 Korea Grand PrixThe 2011 F1 season began in Melbourne on March 25 and the Korean Grand Prix is once again set for the latter half of the season on October 16. Qualifying will be from October 14. Top drivers includ-ing Sebastian Vettel, Mark Webber, Fer-nando Alonso, and Lewis Hamilton, as well as relative newcomers such as Pastor Maldonado, Paul di Resta, Jerome dAm-brosio, and Sergio Perez will be compet-ing. Participating teams include Redbull Racing, Ferrari, Mercedes GP, Renault, McLaren, Williams, Sauber, Lotus, HRT, Force India, and Virgin. The qualifying sessions take place on Friday to Saturday and the main race is on Sunday. Specta-tors can buy either a one-day or a three-day pass and select their seats in the Main Grandstand and Grandstands A through J. If last year was any indication, this year is going to be a fantastic event. The entire venue will be finished by that point to fit even more people at the race

and all the nearby attractions promise to be even better.

How to Watch the RaceFor racing aficionados and rookies alike, there are few more exciting races to at-tend or watch than an F1 grand prix. If you can make it to Korea for the race, you’d better start with a pair of earplugs because the sound generated by those 24 cars is truly tremendous. From there, it’s a good investment to learn how to read the lap and sector times. The track is di-vided into three sections for timing pur-poses and studying the section time will allow you to guess the characteristics of each driver. Who’s strong in certain sec-tions tells you a lot about the drivers and even helps you to predict whether one driver might overtake another in upcom-ing sections. Since the race is on when the sun is high, pack yourself some sun-screen lotion and sunglasses. Most of the seats at the Korean track afford great vantage points for all the action but you may want to study the layout before you buy your tickets so you can seat yourself on a great corner that promises plenty of action.


The stunning main grandstand holds

16,000 and combines modern design

with traditional Korean architecture.

ASIA

Tokyo, Japan Osaka, Japan Singapore Mumbai, Indiatel 81-3-3211-0742 tel 81-6-6261-5766 tel 65-6337-2366 tel 91-22-2653-3420fax 81-3-3211-2093 fax 81-6-6261-5818 fax 65-6337-8966 fax 91-22-2653-3429

AMERICA

New Jersey, US Houston, US Orlando, US Panama City, Panamatel 1-201-816-4080 tel 1-281-578-7097 tel 1-407-249-7350 tel 507-213-7657fax 1-201-816-4083 fax 1-281-578-7330 fax 1-407-275-4940 fax 507-213-7660

EUROPE

London, UK Oslo, Norway Athens, Greece Rotterdam, The Netherlandstel 44-20-8741-0501 tel 47-2310-0890 tel 30-210-428-2992 tel 31-10-212-1567fax 44-20-8741-5620 fax 47-2310-0899 fax 30-210-428-2144 fax 31-10-212-5134

MIDDLE EAST

Madrid, Spain Moscow, Russia Dubai, UAE Riyadh, Saudi Arabiatel 34-91-732-0454 tel 7-495-258-1381 tel 971-4-425-7995 tel 966-1-464-4696fax 34-91-733-2389 fax 7-495-258-1382 fax 971-4-425-7996 fax 966-1-464-2352

AFRICA

Kuwait City, Kuwait Istanbul, Turkey Luanda, Angolatel 965-2291-5354 tel 90-212-290-2860 tel 244-222-370-699fax 965-2291-5355 fax 90-212-290-2862 fax 244-222-370-667

ASIA

Beijing, China Changzhou, China Changzhou, China Yangzhong, ChinaBeijing Hyundai Jingcheng Hyundai Construction Changzhou Hyundai Hydraulic Hyundai Heavy Industries Electric Construction Machinery Co., Ltd. Machinery Co., Ltd. Machinery Co., Ltd. Co., Ltdtel 86-10-8321-8347 tel 86-519-8519-1002 tel 86-519-8302-1726 tel 86-511-8842-0666fax 86-10-8321-1353 fax 86-519-8519-1385 fax 86-519-8302-1710 fax 86-511-8842-0668

Taian, China Yantai, China Shanghai, China Shanghai, ChinaHyundai (Shandong) Heavy Yantai Hyundai Heavy Hyundai Heavy Industries China Hyundai Financial LeasingIndustries Machinery Co., Ltd Industries. Co., Ltd Investement Co.,Ltd. Co., Ltd.tel 86-538-349-0110 tel 86-535-216-5800 tel 86-21-6880-0808 tel 86-21-6888-0505fax 86-538-349-0098 fax 86-535-216-5810 fax 86-212-6880-0608 fax 86-21-5876-4027

AMERICA

Shanghai, China Shanghai, China Pune, India Chicago, US China R&D Center Shanghai Grand China Hyundai Hyundai Construction Equipment Hyundai Construction Equipmenttel 86-21-6880-0808 Shipping Co.,Ltd. India Pvt., Ltd. Americas, Inc.fax 86-21-6880-0209 tel 86-21-5881-4784 tel 91-21-3530-1700 tel 1-847-228-8847 fax 86-21-5881-4744 fax 91-21-3530-1712 fax 1-847-437-3574

EUROPE

Mansfield, US Geel, Belgium Sofia, Bulgaria Bochum, GermanyHyundai Ideal Electric Company Hyundai Heavy Industries Hyundai Heavy Industires Co, Jahnel- Kestermanntel 1-419-522-3611 Europe N.V. - Bulgaria Getribewrke Gmbhfax 1-419-522-9386 tel 32-14-56-2211 tel 359-2-803-3200 tel 49-234-339-0 fax 32-14-59-3405 fax 359-2-803-3203 fax 49-234-339-200

AFRICA

Paris, France Budapest, Hungary Abuja, Nigeria Abuja, NigeriaHyundai Heavy Industries Hyundai Technologies Center Hyundai Heavy Industries Co., Nikorma Transport Ltd.France SAS Hungary Ltd. Nigeria Ltd.tel 33-1-4637-1761 tel 36-1-273-3730 tel 234-803-544-2774 tel 234-9-460-85503fax 33-1-4637-1295 fax 36-1-220-6708 234-807-276-9160 234-803-775-6984

GLOBAL NETWORK

Overseas Offices

Overseas Incorporated Firms

New Horizons Autumn 2011

Documents

Transcript of New Horizons Autumn 2011