LS Cable Wins $312 Million Undersea Cables Contract from KEPCO

---

Researched by Industrial Info Resources (Sugar Land, Texas)--South Korea's leading cable manufacturer, LS Cable (Gyeonggi-do), has secured a $312 million contract from Korea Electric Power Corporation (NYSE:KEP) (KEPCO) (Seoul, South Korea), South Korea's leading electric utility firm, to develop underwater cables for power transmission for the country's largest undersea power project connecting mainland Jindo with Jeju Island. The $415 million project is slated for completion by 2012.

Under the contract, LS Cable will lay two lines, one consisting of two high-voltage direct-current power cables, while the other cable will be a communications cable. The cables will be laid in both directions along a stretch of 122 kilometers between Jindo and Jeju Island. The cables will run through an undersea section of 105 kilometers and a land section of 17 kilometers. The two-way connection will be designed to ensure the flow of power in both directions so that failure in one of the lines will not affect transmission in the other. The cables will also be used to transmit surplus power generated from the upcoming wind and tidal power projects in Jeju Island to the mainland.

The Jindo-Jeju Island interconnection project is the second of its kind that is being developed to address the growing power requirements of the island. It is also the second undersea cable project for power transmission being undertaken in Korea following the Haenam-Jeju Island connection project that was completed in 1997. This project was developed by Nexans SA (EPA:NEX) (Paris, France) and constitutes submarine cables of 180 kilovolts (kV) over a stretch of 101 kilometers between Haenam and Jeju Island, consisting of an undersea section of 9 kilometers and a land section of 5 kilometers. The Jindo-Jeju Island project will be developed at a considerable distance from the Haenam-Jeju Island project to ensure minimal disturbance of marine resources in the coastal region and to prevent the possibility of a breakdown in both of the interconnections in the event of a natural disaster.

LS Cable will commence construction of the cables for the project in the first half of this year at its factory in the Songjeong Industrial Complex in Gangwon province. The manufacturing unit was established last year with an investment of more than $90 million. The firm has also set up a fault prevention and detection system equipped with real-time monitoring capabilities in order to facilitate the maintenance and repair of the cables and enable a speedy response in the case of emergencies.

LS Cable emerged as the first domestic manufacturer of cables to secure a contract for a submarine power grid-project in an international competitive bidding process in South Korea, outbidding international contestants such as Nexans and J-Power Systems Corporation (Tokyo, Japan). The firm was also the only player to qualify in the technical evaluation round of a three-step evaluation process comprising price evaluation, assessment of the company's technical competence and its performance guarantee, and a comprehensive assessment of the bidders and proposals submitted by them.

The deal will enable LS Cable to penetrate into the global submarine cable market, more than 90% of which is currently dominated by European firms. The global market for submarine cables is growing at an estimated annual rate of 30%, largely because of intense efforts by European nations to reduce the overall cost of power generation, emphasis on offshore wind power generation, and the development of nuclear power projects away from mainland regions because of environmental concerns.

LS Cable intends to strengthen its product portfolio by undertaking the development of undersea cables of 22.9 kV for medium voltage power distribution in addition to the company's existing product line of 180-kV and 250-kV submarine cables. LS Cable was the fourth firm in the world to develop mass impregnated high-voltage submarine cables of 250 kV. Although this product accounts for most of the global demand for submarine cables, the market is dominated by Nexans, Prysmian SpA (BIT:PRY) (Milan, Italy) and ABB Limited (NYSE:ABB) (Zurich, Switzerland) because of the high technology barrier involved. To date, South Korea has relied exclusively on imports to meet its demand for submarine cables.

Investments in the Jindo-Jeju Island interconnection project will hopefully help revitalize the local economy and generate additional employment opportunities in the midst of the prevalent financial turmoil worldwide. The project will also enable Korea to play an instrumental role in the upcoming Northeast Asian power connection projects that will facilitate the interconnection of the power grids of five Northeast Asian countries--China, Japan, North Korea, South Korea and Russia--to facilitate efficient power distribution, development of overseas power resources, reduction in operational expenses, and increased reliability of power supply. Another ambitious project in this sector is the ongoing development of an undersea cable network across the Mediterranean Sea to connect North Africa with Western Europe.

Industrial Info Resources (IIR) is a marketing information service specializing in industrial process, energy and financial related markets with products and services ranging from industry news, analytics, forecasting, plant and project databases, as well as multimedia services.