LSIS knock back Hyosung in KEPCO-Alstom tender for smart grid in South Korea

Electrical component maker LSIS said Wednesday it has acquired advanced technology for an electric power transmission system at the expense of rival Hyosung, in development of smart grid in South Korea.

Both firms tendered bids to a joint venture between the state-run Korea Electric Power Corporation (KEPCO) and French energy company Alstom called KEPCO-Alstom Power Electronics Systems (KAPES) for the technology to build advanced high-voltage direct current (HVDC) systems.

LSIS CEO and Vice Chairman Koo Ja-kyun visited France last month and met with Alstom executives. He is known to have played a pivotal role in securing the contract. “Koo’s behind-the-scenes role has been important for LSIS in strengthening partnerships with overseas businesses as well as affirming his leadership,” said an industry official, asking not to be named.

Sophisticated HVDC systems have been touted as a future growth engine for industrial firms. Alstom, Germany’s Siemens and Switzerland’s ABB control over 90 percent of the market. LSIS and Hyosung have been developing their own technology to catch-up with their overseas competitors, although they are still years away from achieving industry dominance.

HVDC has more advantages than alternating-current (AC) systems in transferring power over long distances, making it integral in the transmission of wind or water power plants in coastal areas.

It is also an important element for LSIS and Hyosung, as well as larger firms such as Hyundai Heavy Industries and POSCO, as part of their smart grid strategies and to build environmentally-friendly infrastructure. Korean companies have been trying to win orders to build grids in China, Japan and Russia.

KAPES decision to award the contract to LSIS was based on its technology level, quality control and financial stability, each accounting for 70, 20 and 10 percent of the total score. LSIS reportedly scored substantially higher than Hyosung in technology. An expert from Alstom toured LSIS plants in Busan and Cheonan earlier this month and was impressed by the facilities, according to an LSIS official.

HVDC is divided into two types, line-commutated convertors (LCC) and voltage-sourced convertors (VSC), and LSIS has acquired the know-how to make the former. “The ratio between LCC and VSC in the world market is 8 to 2,” said LSIS spokesman Kim Dae-sung. “The market consensus is that the portion of LCC in the market will remain larger than VSC going forward. LSIS will continue efforts to expand our global market share.”

The company has been running a pilot project on Jeju Island since 2009 and technological developments there will create synergy with its latest deal.

A Hyosung spokeswoman downplayed the significance of the win saying, “We already have our own LCC technology and is focusing more on developing VSC.”

The HVDC market is currently worth $14 billion and expected to grow to $73 billion by 2020 and $143 billion, according to local brokerages