Recently, as energy-related bills such as the Special Act on Power Networks and the Special Act on Offshore Wind Power passed through the National Assembly's standing committees, expectations are growing for the benefits to LS Group, which has a vertical integration structure in the power equipment and construction sector. The bills focus on expanding power generation and transmission networks, and LS Group is engaged in various businesses necessary for this process, including power equipment, power cables, and underwater cable construction.
On the 19th, the National Assembly's Industry, Trade, and Energy Committee held a plenary meeting and passed the three energy laws, including the Special Act on Power Networks and the Special Act on Offshore Wind Power, with an agreement between the ruling and opposition parties. These bills are expected to go through the Legislative Judiciary Committee and be voted on in the National Assembly's extraordinary session at the end of this month. Given the agreement between the parties to pass it through the Industry Committee, the possibility of it passing in the plenary session is rated as high.
The Special Act on Power Networks includes provisions for the government to oversee the control tower of the transmission line expansion project, which has been mainly invested in by Korea Electric Power Corporation, and to simplify related licensing procedures. The aim is to resolve the chronic issue of delays in power network construction. The Special Act on Offshore Wind Power contains regulations to simplify licensing processes, such as omitting environmental impact assessments in offshore wind projects, and allows the government to directly plan the locations for offshore wind power development. The government plans to significantly expand the domestic offshore wind power installation capacity from the current 0.2 gigawatts (GW) to 14.3 GW by 2030, increasing it by more than 2 GW annually.
If the bill passes, a favorable business environment is expected to unfold for LS Group, which has a vertical integration structure that connects power equipment to cables and construction. LS ELECTRIC produces various transmission and distribution devices necessary to safely supply power generated from generation sources to corporations, households, and other consumers. Recently, demand for high-voltage transformers has surged in North America, increasing the proportion of exports; however, the domestic market still accounts for about 60% of total sales. LS ELECTRIC maintains its position as the number one operator in the domestic distribution equipment market, with a market share of 60-70%.
LS Cable & System and LS Marine Solution are also expected to benefit from increased domestic workload. LS Cable & System produces a variety of power cables, from high voltage to low voltage, as well as essential underwater cables for offshore wind power generation. LS Marine Solution focuses on the construction and maintenance of underwater cables and has incorporated LS Buildwin, a specialized company in underground cable construction, as a subsidiary last year, thereby acquiring capabilities in both underwater and underground construction.
The two companies are participating in several domestic offshore wind projects as part of a consortium. In September 2023, they were selected as the preferred negotiator for the underwater cable section of the Anma Offshore Wind Power Project, which is the largest offshore wind project in the country, with a capacity of 532 MW. In November of last year, they were also chosen as the preferred negotiator for the Taean Offshore Wind Power Project, which has a capacity of 500 MW. Ku Bon-kyu, the representative of LS Cable & System, has concurrently served as the representative of LS Marine Solution since November of last year, enhancing synergies between the two companies.
Thanks to the strong performance of its subsidiaries in the power sector, the holding company LS recorded revenues of 27.5454 trillion won and an operating profit of 1.0742 trillion won, both increasing by 12.5% and 19.4% year-on-year, respectively. This is the first time the annual operating profit has exceeded 1 trillion won. Park Geon-young from KB Securities Research Institute noted, "LS is expected to see an increase in net worth as the major subsidiaries grow over time."