Doosan Heavy Industries to Acquire Skoda Power for $657 Million

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Researched by Industrial Info Resources (Sugar Land, Texas)--South Korea's leading heavy industry construction company, Doosan Heavy Industry and Construction Company (SEO:034020) (Changwon, South Korea) will acquire Skoda Power (Plzen, Czech Republic), a subsidiary of Skoda Holdings AS (Prague, Czech Republic), in a $657 million deal to be completed by the last quarter this year.

By gaining access to Skoda's proprietary expertise in manufacturing boilers, turbines and generators, Doosan will have the capacity to offer a complete power plant construction service, enabling the company to provide single-source engineering, procurement and construction (EPC) services. Turbines are considered to be one of the most technically advanced components of power generation systems, and Doosan expects to gain a competitive edge by gaining access to Skoda's key technology.

A second bonus of the acquisition is that Doosan will have full boiler-turbine-generator (BTG) capability, enabling it to compete more effectively for lucrative BTG package orders. Doosan expects that with the ability to supply manufactured turbines, it will gain improvements in foreign exchange of as much as 30% to 40% on future BTG contracts.

An important aspect is that Doosan will gain access to the vital 50-Hertz steam-turbine market, which is currently accountable for up to 80% of the global market. Access to this market is very difficult to gain without proprietary technologies, and Doosan will now have the capacity to exploit this segment globally.

The acquisition will also enable Doosan to participate in the retrofit and other power plant services and compete at the highest level with global leaders such as General Electric Company (NYSE:GE) (Fairfield, Connecticut), Alstom SA (EPA:ALO) (Levallois-Perret, France), and Siemens AG (NYSE:SI) (Munich, Germany).

Skoda will benefit through an expansion in its product portfolio and enhanced presence in Slovakia and the Czech Republic. Doosan already has an established presence in Europe through subsidiary Doosan Babcock Energy Limited (Crawley, England) and in the Czech Republic through subsidiary Doosan Infracore Europe (Frameries, Belgium), which has a manufacturing unit in Dobris for the construction of Bobcat construction equipment. Doosan acquired the Bobcat utility and attachments business from Ingersoll-Rand plc (NYSE:IR) (Dublin, Ireland) for $4.9 billion in July 2007.

In return for the $657 million investment, Doosan hopes that the acquisition will generate additional annual revenues to the tune of about $4.26 billion by 2020. Doosan intends to set up a new company, Doosan Power Systems, to have overall control over Doosan Babcock and Skoda Power. The new company will form the base for Doosan's proposed expansion in the European, U.S. and other markets.

Doosan has a strong track record in the construction of nuclear, hydroelectric, thermal and combined-cycle power plants, and has developed more than 300 power projects globally. The company is currently engaged in the construction of 60 power plants worldwide and is also developing fuel cells, wind power systems, and other environmentally friendly energy systems.

Industrial Info Resources (IIR) is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy related markets. For more than 26 years, Industrial Info has provided plant and project opportunity databases, market forecasts, high resolution maps, and daily industry news.