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CSBC Cashes In On Taiwan's Offshore Wind Turbine Boom

Jul 14, 2014 | By Steve Chuang

CSBC Corp., Taiwan plans to set up a marine construction services subsidiary to develop offshore wind power farms in 2015, according to company chairman Robert Lai. The state-owned shipbuilder hopes to tap into the huge business opportunities created by Taiwan's active development in the green energy segment.

Lai said that the new business shows considerable growth potential. The Bureau of Energy under the Ministry of Economic Affairs plans to increase annual offshore wind generation capacity to three gigawatts by 2030. The capacity will be provided by 600 turbines to be constructed successively by local government-linked and private enterprises. Construction and maintenance of those wind turbines will call for different kinds of vessels, the chairman added. CSBC therefore decided to establish a subsidiary in 2015 to meet the market demand.

Lai indicated that the subsidiary will be fully owned by CSBC. It will have a large fleet consisting of various vessels for marine construction, including topsides and turbine installation vessels, towing vessels, barge-carrying ships, transport vessels, and cable layers. Initial investment will exceed NT$10 billion (US$333.33 million).

As part of the venture, CSBC inked a contract in March with Fuhai Wind Farm Corporation, a Taiwanese government-approved wind farm developer, to set up a meteorological and oceanographic observation tower along with 30 offshore wind turbines. The NT$3 billion-plus (US$100 million) project will get under early next year and finish by the end of 2018.

CSBC has also been in talks with another offshore wind power generation firm on an expanded contract to develop submarine cable infrastructure and lay undersea cables for 36 turbines. The contract is expected to be finalized in July

CSBC said that the subsidiary will enjoy strong equipment and shipyard support from the parent company. It expects the new venture's annual revenue to reach NT$4 billion (US$133.3 million) initially and then shoot up to NT$8 billion (US$266.6 million) after building a reputation in the sector, providing a new growth engine for CSBC.

Shipbuilding Sector to Remain Depressed Until 2017
CSBC posted revenue of NT$24.9 billion (US$830 million) and net profits of NT$440 million (US$14.67 million), or NT$0.59 per share, in 2013. The company earns 90% of its revenue from shipbuilding, a sector that has underperformed recently. Lai predicts the business to remain depressed until 2017 mainly due to the current oversupply in the global shipping industry.

The lackluster performance in the first quarter of 2014 has boded badly for the company's outlook this year. In the quarter, the firm reported revenue of NT$7.169 billion (US$238.96 million), with consolidated net profits plummeting 70.69% year-on-year to only NT$52.67 million (US$1.755 million).

On the plus side, the company recently secured an N$2.58 billion order from CPC Corporation, Taiwan, a state-owned petroleum, gas and gasoline supplier, to build two oil tankers for delivery by the end of 2016. The 40,000-ton deadweight vessels will be delivered by the end of 2016.

CSBC also expects to win a contract from Ta-Ho Maritime Corp., a Taiwan-based shipping company, for two 23,500-ton concrete ships in July, and a tender from the Ministry of National Defense for six 800-ton mine-hunting ships in September. If finalized, the orders will help shore up the shipbuilder's revenue position in the years ahead. (SC)

CSBC's Performance by Quarter
Q2, 2013
Q3, 2013
Q4, 2013
Q1, 2014
NT$6.147 Bn.
NT$6.086 Bn.
NT$6.518 Bn.
NT$7.169 Bn.
Net Profits
NT$152 M.
NT$48 M.
NT$59 M.
NT$53 M.
Earnings per Share
Source: Market Observation Post System

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