DAEWOO ENGINEERING & CONSTRUCTION

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1 Global E&C Leader DAEWOO ENGINEERING & CONSTRUCTION 3Q 2011 RESULT NOVEMBER, 2011

2 CONTENTS Investor Relations 2011 I. Company Overview II. 3Q Performance III. Competitiveness IV. Major Issues [Appendix] Financial Statement 2

3 I. Company Overview 1. Introduction 2. Milestones & Ownership Structure 3. Business Networks * Bonny Island LNG Plant #1,2,3,5&6 / Nigeria 3

4 1. Introduction A global E&C leader, creating the highest corporate value with the best technologies and human resources This year, we are facing the turning point by KDB s acquisition of 50.8% shares of Daewoo E&C. Also, the synergies between the best technologies/human resources of Daewoo E&C and the fluent financing know-how of KDB are expected in the future. Through the strategies of expanding overseas business, reinforcing development business, and talented human resource management, we pursue the targets of new order KRW 14 tn., sales revenues KRW 7.2 tn., and operating margin 5.2% in President & CEO Seo, Jong-Uk It is the time to focus on the corporate value of Daewoo E&C, which is about to leap forward as a global top contractor. Company overview (1) Main business : General contractor (2) Foundation : 1973/ Seoul, Korea (3) Manpower : 5,962 (FY2011.3Q end) (4) Assets : KRW 9,836 bn. (USD 9,145 mn., FY2011.3Q end) (5) Annual sales revenues : KRW 6,734 bn. (USD 6,265 mn., FY2010) (6) Awards 2006~2008 Ranked first in the National construction capacity 2009 Received grand prize in the Korea eco-friendly residential award 4

5 2. Milestones & Ownership Structure With KDB s acquisition, Daewoo E&C will be a global top contractor 1973 Established Daewoo Construction Co., Ltd. 1970~1980s Expanded the overseas markets into Nigeria, Algeria, UAE, Iran, Libya, USA, Japan, Taiwan, Cameroon, Bangladesh, Singapore, Malaysia, etc. 1990s Expanded the overseas markets in China, Laos, Pakistan, etc Incorporated into Kumho Asiana Group 2006~2008 Ranked 1 st in National Construction Capacity for three consecutive yrs Acquired by Korea Development Bank(KDB) Ownership Structure Free Float 24.9% KAG 22.4% Treasury stock 1.1% kdb Insurrnce 0.8% KDB 50.8% Korea Development Bank (KDB) World class Corporate & Investment Bank Corporate banking specialist, Korea s PF market leader Overview Foundation : 1 st January, 1954 Capital / Asset : KRW 16,228 bn. / KRW 113,206 bn. Credit rating : Moody s A1, S&P A, Fitch A+ Shareholder : Korea government 100% 5

6 3. Business networks Operating over 30 overseas sites & 20 branches / subsidiaries Business sites & networks 6

7 II. Performance & Plans 1. 3Q Performance (Cumulative Total) (1) New Orders (2) Order Backlogs (3) Sales Revenues (4) Gross profit / Operating profit 2. Mid to Long Term Plans (1) Growth (2) Profitability *Floating Island / Korea 7

8 1. 3Q Performance (1) New orders Winning mega size power project in overseas market Successful new order intakes from housing business despite of sluggish market [unit : KRW bn.] Breakdown of new orders [unit : KRW bn.] Civil Plant Arch. Housing Overseas Total Civil Civil (718, 8.4%) 3Q ,634 2,841 2,849 8,384 Plant 4.1% Plant Plant (353, 4.1%) 3Q ,202 2,614 2,638 8,525 8, % 8, % Arch. Housing Arch. (2,202, 25.8%) RC1 (183) Hanam City Devel. (100) Housing (2,614, 30.7%) Sejong Prugio (620) Seosan Prugio (154) Hanam City Devel. (124) Bongbang Prugio (96) Housing PJs(in-house) : Amout - KRW 774 Bil. - Sejong Prugio / KRW 620 Bil. / 2,592 units - Seosan Prugio / KRW 154 Bil. / 706 units Officetel/ Residential Complex : 15 PJs, KRW 854 Bil. 34.0% 3Q % 3Q11 Plant Etc. Overseas/Plant (1,852, 21.7%) Oman SUR IPP (1,330) Nigeria Obite (82) Nigeria EGTL V/O (242) Overseas/Etc. (786, 9.2%) Vietnam Hanoi Clev. (212) Malaysia One IFC (206) Winning mega size power project - Oman SUR IPP USD : 1,258 mil - Nigeria Obite IPP : USD 773 mil (Partial) Domestic Overseas 8

9 1. 3Q Performance (2) Order backlogs Increase of overseas order backlogs in terms of volume and portion Increases middle east portion in overseas business (44.9%) Civil 6, % KRW 37,013 Bil. Overseas 7, % Housing Public: 3,496 / Private: 2,730 Plant % Arch. 5, % Plant Power: 264 / LNG: 144 Housing 17, % Housing - Rehabil. : 12,760 - Private : 3,333 - In-house: Public : 377 Overseas < Segment > - Plant : 6,536 - Etc : 1,293 < Region > - Middle East : 3,515 - Africa : 3,477 - Etc : 864 FY10 3Q11 Civil 7,114 6,227 Plant Arch. 4,382 5,011 Increased overseas order backlogs - FY10 : KRW 6,474 Bil. - 3Q11 : KRW 7,829 Bil. - Portion: 18.3% 21.2% Housing 16,562 17,272 [unit : KRW bn.] Overseas 6,474 7,829 Total 35,349 37,013 High turnover of housing backlogs due to active supply - Housing rehabilitation backlogs KRW 12,760 Bil. =>14 PJs will be supplied in this year (KRW 1,970 Bil.) - In-house and public projects backlogs KRW 1,179 Bil. => 11 PJs already commenced out of 13 9

10 1. 3Q Performance (3) Sales revenue Increase of overseas sales revenue in terms of volume & portion Slight decrease of sales revenue due to Libyan turmoil Breakdown of sales revenues [unit : KRW bn.] Civil Plant Arch. Housing Overseas Etc. Total [unit : KRW bn.] Civil Civil (1,076, 22.0%) 3Q10 1, ,296 1, ,927 3Q11 1, , ,888 4,927 4,888 Plant Plant (356, 7.3%) Arch. Arch. (852, 17.4%) Increase in overseas sales revenues - Up 27.1% YoY 74.0% 66.8% Housing Housing (970, 19.8%) Enhanced soundness of housing business - Public sector portion : 8.2% 22.9% - Rehabilitation biz. portion : 27.3% 42.3% 26.0% 33.2% Plant Etc. Overseas/Plant (1,294, 26.4%) Overseas/Etc. (331, 6.8%) Slight decrease in total sales revenues - Down 0.8% YoY - Delay in groundbreaking of new housing PJs - Impact of Libyan turmoil on sales revenues: KRW 195 Bil. 3Q10 3Q11 Domestic Overseas 10

11 1. 3Q Performance (4) Gross profit / Operating profit Improvement of profitability through overall business 3Q10 3Q11 4.7% 232 Gross Profit(GP Margin) 10.1% % % % [unit : KRW bn.] % 9.3% % Domestic Overseas 3Q10 3Q11 3Q10 3Q11 3Q10 3Q11 3Q10 3Q11 [unit : KRW bn.] [unit : KRW bn.] Civil Plant Arch. Housing Overseas Etc. Total K-GAAP IFRS Remark (50) % 9.8% 12.0% 3.8% (3.9%) 22.9% 4.7% (1) % 5.3% 11.5% 13.5% 9.3% (9.9%) 10.1% * K-GAAP * IFRS 5.2% 0.2% 3Q10 3Q11 8 Operating Profit(OP Margin) % (276) 0.2% (5.6%) % 6.9% [unit : KRW bn.] 6.9% 338 Other operating income Other operating expenses Improvement of gross profit - Up 113% YoY - Improvement of profitability in overseas, housing and civil business Making a turnaround - Positive about achievement of annual target : 5.2% - Expecting gains from asset disposal in 4Q 11

12 2. Mid-to-long term plan (1) Growth The overseas portion of new orders will increase up to 46% by target: new orders KRW 19,000 bn., sales revenues KRW 11,500 bn. New Orders Sales Revenue Domestic Overseas CAGR 12.9% 19,000 Domestic Overseas CAGR 14.3% [unit : KRW bn.] 11,500 11,700 66% 34% 14,000 58% 42% 15,000 57% 43% 16,500 56% 44% 54% 46% 6,730 76% 24% 7,200 65% 35% 8,400 64% 36% 9,770 60% 40% 59% 41% (F) 2012(F) 2013(F) 2014(F) (F) 2012(F) 2013(F) 2014(F) New Orders - Expecting growth at a CAGR of 12.9% from 2010 to Focus on more competitive businesses (development, power plant, LNG plant) - Strengthen global EPC capability & overseas sales networks => The portion of the overseas business will be above 50% from 2015 Sales Revenue - Expecting growth at a CAGR of 14.3% from 2010 to 2014 => The portion of the overseas business will be above 41% by

13 2. Mid-to-long term plan (2) Profitability Expecting improvement of overseas business profitability from 2011 Gross profit KRW 1,311 bn., Operating profit KRW 805 bn. [unit : KRW bn.] Domestic Overseas 1.8% 123 Gross Profit(GP Margin) 10.5% 10.9% 10.1% 1, % 59% 59% 41% 41% 42% 11.4% 1,311 57% 43% [unit : KRW bn.] -5.4% -363 Operating Profit(OP Margin) 6.5% 5.9% 5.2% % Civil Plant Arch. Housing Overseas Total GP OP GP OP % 12.4% 11.5% 8.9% 11.8% 10.1% % % 11.3% 10.3% 12.6% 11.7% 10.5% % FY 2014 Target : GP Margin 11.4%, OP Margin 7.0% - Secure new orders in high and stable profit level - Increase profitability through advanced management Securing optimum margin in housing & overseas biz. - FY 2012 GP Margin Target Housing: 12.6% Overseas. : 11.7% 13

14 III. Competitiveness 1. Power Plant 2. LNG/Gas Plant 3. Water Treatment 4. Renewable Energy 5. Housing / Development * Benghazi North Power Plant / Libya 14

15 1. Power plant (1) Thermal World class power plant contractor with experiences & manpower Competitiveness - Engineering : In-house engineering capability which can cover overall engineering process - Procurement : Effective procurement management through strong relation with major equipment suppliers - Construction : Maintain proven manpower & construction know-how - Human Resource : Power Plant Experts 504 ppl (including 197 design/engineering experts) - Successful overseas new order intake : Winning 5 PJs in 5 different countries for the past 2 yrs. (5,500MW ) Strategy - Enhance reputation with proven track record & capacity - Strengthen partnership with major developers in growing IPP market - Seek the opportunity to participate in IPP as a developer Zwitina CCPP 750MW Libya Jorf Lasfar IPP 700 MW Morocco Shuweihat 3 IPP 1,600 MW U.A.E Obite IPP 420 MW Nigeria Sur IPP 2,000 MW Oman 15

16 1. Power plant (2) Nuclear Expand the nuclear power business with experience and advanced technology Market condition NPP units are planned till 2030 (approx. USD 1.1 trillion). - Korea Gov. plans to increase NPP to 39 units from current 20 units by Expect strong growth of NPP market in Turkey, South Africa, Romania, Finland, Thailand, China, etc Competitiveness & Strategy - Accumulated experience & technology : NPP construction as a prime contractor EPC of Research and Training Reactor - Target on receiving 8 units of NPP by 2020 (4 in domestic & 4 in overseas market) - Advance into high level radioactive waste disposal facility - Making utmost effort to secure Research Reactor Project based on experience of JRTR (55 units of Research Reactors are expected in more than 40 countries till 2025) - Participated in government-initiated SMART Project exclusively (North Africa, Middle East, etc.) Domestic Overseas Wolsong NPP #3,4 1,400 MW Shin Wolsong NPP #1,2 2,000 MW Wolsong Radioactive Waste Disposal Facility Jordan Research and Training Reactor Qinshan NPP Technical consulting 16

17 2. LNG / Gas Plant Strong LNG / Gas Plant contractor LNG liquefaction plant experience & competitiveness - Participated in 10 LNG liquefaction plants (market share: 10%) 5 out of 6 LNG liquefaction plants in Nigeria are completed by Daewoo E&C Completed 2 LNG liquefaction plants in Russia 3 LNG liquefaction plants are under construction in Algeria and Papua New Guinea - Expect following new order intakes based on experiences & technology (Brass LNG, NLNG 7+, etc.) Gas plant experience & competitiveness - Accumulated various gas plant experiences (CPF, GTL, etc.) in Nigeria - A reliable construction partner among IOC - Make efforts to diversify regional market based on differentiated technology and experience LNG Liquefaction Plant LNG Receiving terminal Gas Plant Bonny LNG Train #1~3,5,6 / Nigeria Arzew LNG Plant Algeria Tongyoung LNG Terminal Korea Incheon LNG Terminal Korea EGTL Plant Nigeria 17

18 3. Water Treatment Total solution provider in water treatment field Experience & competitiveness - Strong in both construction and O&M Construction: 70 PJs / O&M: 17 PJs - Ranked 2 nd in water treatment field by ENR (*1 st : Hochtief) - Develop & adopt own technology through Daewoo institute of construction technology (DNR, DMBR, etc.) Strategy - Total solution provider capable of construction / O&M - Widen technology gap against rival companies - Actively advance into overseas market 주요실적 Construction O&M New Dubai WTP Nanji WTP Gulpocheon Tailrace Gulpocheon WTP Anyang WTP 18

19 4. Renewable Energy Leading renewable energy filled with technologies & experiences Tidal power experience & competitiveness - Lead the tidal power market through the experience of the world biggest Sihwa PJ(254MW) - Play a leading role to establish West coast tidal belt in Korea Hydro power experience & competitiveness - Worldwide experiences including India Dauliganga hydro power, Laos Houay Ho, etc. - Cooperate with K-Water for overseas development project Bio-gas experience & competitiveness - Secure competitiveness based on own technology - DBS developed by Daewoo institute of construction technology - Seek opportunities to advance into global market through export of DBS technology Tidal power Hydro power Bio-gas Sihwa tidal power Laos Houay Ho India Dauliganga Asan Bio-gas Bosung Bio-gas 19

20 5. Housing / Development No.1 housing supplier in Korea with differentiated competitiveness Market condition - Recovery of housing demand in provincial area - Decreased housing supply - Increase of 1 or 2 people household, stiff increase of rent ratio => stimulate demand on small size housing unit Competitiveness - No.1 housing supplier in Korea since Preference of consumer due to Daewoo s reputation & differentiated product - Expect to occupy 35% of officetel(* Korean form of studio apartment) market in 2011 Strategy - Supply of housing targeting at end users demand & appetite - Actively cope with supply/demand & government s policy - Reinforcing risk management: PF guarantee amount, unsold apartment units Housing supply Major projects in 2011 [units] 11,112 14,947 7,498 7,676 8,490 13, Q Sejong Prugio Seosuwon Lake Prugio Songpa Prugio City 20

21 IV. Major Issues 1. Disposal of none-core asset 2. Enhancement of financial structure 3. Overseas business *Shin Wolsong NPP #1,2(2003.8~2013.1) 21

22 1. Disposal of none-core assets Expecting KRW 1,000 Bil. cash inflows from none-core assets disposal in this year Sales of Daewoo Entec. will be completed by early November Disposal plan of none-core assets Book Value(BV) Korea Express Kumho Tire Seoul Expressway Hanoi Hotel Daewoo Entec. Etc. KRW 970 Bil. Disposal Price KRW 1,270 Bil. Disposal Gain Cash Inflows Cash outflows from Seoul Expressway Deal KRW 90.9 Bil. KRW 430 Bil. KRW 1,000 Bil. Closed deals (3Q, Cumulative total) - Seoul Expressway : disposal gain KRW 80.9 Bil. - Kumho Tire : disposal gain KRW 21.3 Bil. Korea Express - No. of shares : 4.25 mil. (18.6%) - BV: KRW 736 Bil. - Expected disposal price/gain : KRW 914/ 178 Bil. - Will be completed in this year - Above is subject to change as a result of further discussion with the acquirer(cj) Daewoo Entec. - BV: KRW 1.3 Bil. - Disposal gain: KRW 58.5 Bil. - Will be closed by early November Hanoi Hotel - BV: KRW 17.1 Bil. - Expected disposal price : Approx. KRW 110 Bil. - Will be completed in this year 22

23 2. Enhancement of financial structure Payback of debt through successful asset disposal Decrease of PF loan amount Liquidity improvement FY Bil. Cash Decrease total amount of cash in hand FY Bil. Cash Net Debt 1,800 Bil.(2010) 1,100 Bil. (2011F) - Total Debt : KRW 2,289.6 Bil.(in 2010 year-end) - Disposal of none-core asset : KRW 1,000 Bil Year end Total debt: 1,500 Bil., Cash: KRW 380 Bil. Debt Payback of debt through asset disposal Debt 1,500 Bil. Annual financial cost - FY 10 Annual net interest cost : KRW Bil. - FY 11 Annual net interest cost : KRW 98.4 Bil. 2,289 Bil. [unit : KRW tn.] Not started Metro PF loan Decrease Plan to decrease Total PF loan amount to KRW 2,800 Bil. by the end of FY10 : KRW 3.85 tn. => FY 11 3Q : KRW 3.33 tn. - Decrease of not started portion due to successful sales Provincial Started Metro Provincial Expecting additional PF loan decrease through strategic partnership with KDB - Target amount : KRW 1 tn. (KRW 0.4 tn. in FY11) - Securitize PF loan through KDB s support 4Q091Q10 2Q 3Q 4Q 1Q11 2Q 3Q 4Q11(E) 23

24 3. Overseas Business Diversify disciplines & regions Fulfill individualized strategies upon each market conditions Market condition - Intensified competition in Middle East market - Growing infrastructure market such as harbors, roads, power plant - Expecting increase of new orders launching in Libya reconstruction market (approx. U$ 120 Bil.) Strategy - Regional strategy 1 Middle East (UAE, Oman, Qatar, Saudi, Iraq): expansion 2 Africa: securing primary market with competitive edge 3 Asia & South America: market & segment diversification Oman : secure infra PJs through strategic relationship with local partners Africa Morocco : seek infra PJ opportunities Qatar : expect new order launching for World Cup 2022 UAE : Active expansion through overall disciplines Algeria : strengthen partnership with downstream engineering company Libya : secure reconstruction PJs ME Asia & Etc Vietnam : focus on development business Malaysia : focus on high-rise building Nigeria : secure primary market South America : SOC participation through KDB s support 24

25 [Appendix] Financial Statement Account Q [unit : W bn.] Cash & Cash Eq Account Receivable 2,728 2,987 Assets for disposal 1,280 1,344 Total Asset 9,459 9,836 Balance Sheet Payable Borrowing 775 2, ,609 Total Liability 6,204 6,456 Capital 2,078 2,078 Retained Earning Total Equity 3,255 3,380 Account Q (Cumulative) Q (Cumulative) Sales 4,926 4,888 Gross Profit Income Statement SG&A Operating Profit Net Income before Tax Net Income

26 This figures provided in this presentation are based on unaudited 3Q, 2011 financial statement. Certain numbers may be presented differently once audited, and the company takes no responsibility and accepts no liability for such changes. Thank you