(Bloomberg) -- A family-run South Korean conglomerate that got its start as an explosives manufacturer and is now transforming itself into a green energy provider is planning more sustainable debt sales after its debut deal this year.
Hanwha Solutions Corp., a Hanwha Group unit run by chaebol heir Kim Dong-kwan, is considering selling offshore green debt potentially in dollars or euros after issuing such notes in yuan in April. The proceeds would help fund its large-scale investments globally for solar and green-hydrogen energy, said chief financial officer Shin Yong-in in an interview in Seoul.
Global green bond sales are growing at a record pace this year, and Korean issuers are the biggest sellers of such debt in Asia after China as President Moon Jae-in pushes the nation to become carbon neutral by 2050. Hanwha Solutions, whose revenue from solar energy rose to 40% of the total last year from 24% five years earlier, plans to spend at least about 4.5 trillion won ($4 billion) in the next five years on green energy, Shin said.
Hanwha Group, which began as a producer of gunpowder and dynamite in 1952, has diversified into petrochemicals, retail, leisure and finances. Hanwha Solutions, which recently bought U.S. hydrogen tank startup Cimarron Composites, will continue to look for M&A opportunities, according to Shin.
‘Turning Point'
“Any company needs a turning point, and I think we're going in the right direction,” given the renewable-energy transition globally, said Shin, who has worked for Hanwha for almost 30 years. “ESG debt now seems a must rather than a choice as investors are changing.”
In a sign of the shift in investors' attitudes, Korea's National Pension Service, which oversees 873 trillion won in assets, said last week it will restrict investments in the coal-mining and power-generation industries. The move may prompt other institutions in the nation to follow.
Hanwha Solutions is also planning its first Korean won ESG note sale this month after its local credit outlook improved, according to Shin. The company may raise funds in various other currencies as well in the future such as the Malaysian ringgit, and it plans to explore other green financing methods outside bonds, he said. The firm may tap the global bond market regularly, Shin said.
Using Leverage
The proceeds from such financing will mainly be used for its growth investments including solar power plant projects in the U.S. and Europe, and the development of solar modules with higher efficiency such as perovskite tandem cells. Since the firm raised about 1.3 trillion won by selling new shares early this year, it has cash reserves to fund such investments, but using leverage properly is also needed, said Shin.
“It's generally agreed that the solar business will grow fast, and we've been focusing on it for more than 10 years,” he said. “Some solar firms failed during that period, but we persevered, and now we're making a profit. What we should do now is to make adequate investments at an appropriate time to lead the green energy market.”
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