LG International started commercial operation

of Wuwei thermal power plant in China

- Joint venture with a Chinese government-owned power company Construction completed two years after the conclusion of the contract in 2015

- Achieved consecutive outcome from the power generation sector in infrastructure business which will boost the development of new projects

The whole view of Wuwei thermal power plant in Gansu Sheng, China

On the 20 ^th , LG International announced that the Wuwei thermal power plant, which was built through a joint venture with the representative power company of Gansu province in China, Gansu Province Electric Power Investment Group Co., Ltd (GEPIC) has recently commenced with operation and is producing power.

Wuwei thermal power plant is the first cogeneration power plant in Wuwei city, built in an area of 410,000㎡ with a total project cost of 3.18 billion RMB. The power generation capacity is 700MW, which can produce about 6 million MWh of electricity and heating energy. This amount can be used by small cities with a population of 500,000. Especially, during the winter season, heating energy can be provided to an area of 14.77 million ㎡. The entire production of electric power will be supplied to the State Grid Corporation of China (SGCG) and companies with large scale power consumption.

In October 2015, LG International signed a joint venture agreement with Gansu Province Electric Power Investment Group Co., Ltd for Wuwei coal-fired cogeneration plant and by investing 318 million RMB LG international now holds the share of 30%.

Gansu Province Electric Power Investment Group Co., Ltd is a major power company owned by the government under the government policy, and is made up of 100% investment from the government of Gansu province. Other than the power generation business, Gansu Province Electric Power Investment Group Co., Ltd is also pursuing various development projects in energy, logistics and the real estate sector. Additionally, in 2016, Gansu province in China maintained stable economic growth rate with gross production of 708.5 million RMB. In particular, the prospect of future development is considered to be positive since Gansu province has been highlighted as a major logistic hub in the One Belt One Road Strategy proposed by China’s President Xi Jinping in 2013.

With the growing opportunities for investment to the power generation and industrial infrastructure business in the northwestern region of China with high growth potential, LG International is planning to implement enterprise-wide efforts to expand the business in China, which has accumulated considerable expertise with resource businesses.

◆ The Hasang Hydroelectric power plant project in Indonesia is also underway. The project is planned to be completed by 2019.

Bird’s eye view of Hasang Hydroelectric power plant in Indonesia

Meanwhile, the power generation sector in the infrastructure business accelerated by LG International is gradually displaying the outcome.

The hydroelectric power plant project in Indonesia invested by private capital is also heading forward smoothly following the projects in China. In 2015, LG International had decided to develop the Hasang Hydroelectric power plant project producing 41MW with the local energy company, Titan Group. And the company is leading a construction project in the Toba region in North Sumatra, with the targeted completion year by 2019. LG International holds 91.98% of the share which makes the company the largest shareholder. Investment in the hydroelectric power plant is made through private capital and is constructed and owned by the private company. The project is a BOO(Build-Own-Operate) type project which means collecting investment costs with direct operation. More importantly, LG International secured an agreement for 30 years of long term power purchase with the owner company, Pelayanan Listrik Negara(PLN).

According to the industry analysis, power generation business can make long-term and stable profits based on the power supply contract leading to a synergy effect with the resource business which means it can lead to stronger business competitiveness.

LG International is planning to expand the power generation business in South East Asia as well as the Middle East region which will accelerate the development of the new power generation project based on project experience and local expertise.

[Reference] ‘One Belt One Road’ Strategy

‘One Belt One Road’ is the combination of ‘One belt’ ？ the Silk Road economic belt that connects China to Central Asia and Europe- and ‘One Road’ ？ 21c maritime Silk Road from Southeast Asia through Southwest Asia to Europe and Africa based on the maritime cooperation between ASEAN-countries. The Xi Jinping administration has indicated that the development of the local economy is the key assignment of the 13 ^th five-year plan and is now proceeding with the implementation of the ‘One Belt One Road’. Through this plan, the administration is expecting to witness outcomes such as a vibrant domestic economy, stronger economic cooperation with foreign countries and maintaining its status as an economic power.