Third-Party Allocation Capital Increase (3)
Heo Min-woong let out a snort of laughter.
“Oh, is that all? So that’s what you meant?”
Chairman Heo Seonghun caught my meaning as well.
“So Hwaan Group should make the first move to stop the capital increase.”
“That’s right.”
In truth, it was still a heavy ask. Better than actually carrying out the takeover, sure, but not by much. Turning Hanjeong Group into an enemy was one thing; breaking the unwritten rules of the business world and standing squarely against the government was another. And just assembling a takeover team and carrying out due diligence would cost a great deal of money. If it were done properly, at least 1 billion won would disappear into it.
In other words, I was asking them to spend that kind of money on a company they might not even acquire.
“It’s not even certain yet, is it?”
“Wouldn’t it be better to prepare in advance?”
“I understand why you’re asking, but… why exactly should I do you that favor? As you know, Hanjeong Group and I are tied by marriage.”
“A family tie is still just another tie, isn’t it?”
Since when did anyone protect in-laws out of sentiment?
Only ordinary families cared about whether someone was an in-law or a distant relative. In a chaebol family, even parents and children, husbands and wives, and brothers and sisters fought each other; what did an in-law amount to?
When money was involved, there was no such thing as family.
“Come to think of it, the phrase ‘chaebol group’ is kind of funny, don’t you think?”
“What do you mean?”
“Even if you call it a group, in the end it’s just a loose collection of separate companies. And that bond can be cut at any time.”
In fact, it wasn’t as though foreign countries had no such corporate groups. Massive corporations often had dozens or even hundreds of subsidiaries.
So what, then, made those different from Korea’s chaebol groups?
It was simple: in chaebol groups, companies with completely unrelated business domains were all gathered under one umbrella.
If you looked at Yuseong Group, Korea’s number one conglomerate, companies like Yuseong Electronics, Yuseong Electric, and Yuseong SC could at least be grouped under the common category of IT. But Yuseong Heavy Industries, Yuseong Life, and Yuseong Securities had little to do with one another at all.
There were two reasons they had been able to expand their business territories in such an octopus-like fashion.
Cross-shareholding and the holding company.
Affiliates owned one another’s shares to form a single chain, and the founding family controlled one holding company to seize the entire group in their grasp.
But by the same token, that also meant that if you took away just the holding company, you could swallow the whole group.
“If KSGI takes control of management rights, then afterward it’ll untangle those knotted shareholding relationships. That would effectively mean dismantling the group. Until now, the companies clustered around Hanjeong Mulsan; after that, each one would have to survive on its own.”
“So what exactly are you trying to say?”
“From another group’s perspective, isn’t that a perfect chance to merge and acquire the companies it needs? Hwaan Group is already pushing renewable energy as its next growth engine. Hanjeong Group has also invested heavily in renewable energy. HJW Energy is a prime example.”
Chairman Heo shook his head.
“Even if they’re both renewable energy, Hanjeong Group’s main strength is wind power. HJW Energy, a wind-turbine equipment company, doesn’t hold much appeal.”
“I learned this from reading manga, but there’s a Japanese saying: if you’re going to swallow poison, swallow the bowl too.”
Chairman Heo understood immediately.
“So now that we’ve already dipped a toe into solar, you want us to take wind power as well?”
“Yes.”
“The solar business, which had been running losses for years, has only just barely started turning a profit. Do you know how renewable energy, with economics as poor as this in Korea, is even making money?”
“Because of KEPCO and carbon credit sales.”
There were countless power plants scattered across Korea.
Not all of them were operated by the state; many private companies ran them. But even if there were many companies producing electricity, there was only one company that sold it.
Korea Electric Power Corporation.
KEPCO operated its own power plants while also buying electricity from private plants nationwide and distributing it.
Of course, renewable energy had higher production costs than thermal or nuclear power. Yet KEPCO bought that electricity at a high price and sold it to consumers at a low one.
In effect, it was partially subsidizing production costs.
The reason it did that was to foster the renewable energy industry.
And then there were carbon credits.
Renewable energy was expanding not because it was more economically viable than thermal or nuclear power, but because the whole world was pushing it hard. In places like the United States and the EU, it was effectively enforced by law.
For automobiles, it was the equivalent of being required to sell one eco-friendly car for every ten internal combustion vehicles. And if you lacked the technology to make such a car and couldn’t sell it?
Then you had to buy credits from companies that did sell eco-friendly cars.
Conversely, EV makers could sell carbon credits equal to the number of cars they had sold to other automakers.
That was where Tisla’s profit structure came from.
At present, the largest portion of Tisla’s revenue did not come from selling cars, but from selling carbon credits.
The same was true in energy. Companies that produced renewable energy could sell credits equal to their output to other high-emission companies and earn money that way.
In other words, it meant the economics of renewable energy were that poor.
“But wind power is even less commercially viable than solar. HJW Energy has been a money-losing company for years.”
I nodded.
“That’s true. In fact, no matter how efficient renewable energy becomes, it can’t fully replace thermal or nuclear power. Intermittency is a problem that can’t be overcome.”
Whether solar or wind, electricity production varied wildly depending on the weather, day and night, and the seasons. So what was supposed to happen to the excess power?
“That’s why they’re using ESS right now.”
ESS, or Energy Storage System, was exactly what it sounded like: a system that stored excess electricity from solar, wind, and other sources and released it when needed.
“A next-generation energy storage system is still just a pile of batteries stacked on top of one another. That’s only a temporary fix.”
“Why do you think so?”
As if he’d been waiting for that question, I answered immediately.
“First, there’s a limit to storage. If you want to double the capacity, you need twice as many batteries; if you want to triple it, three times as many. Batteries aren’t cheap, so you can’t just keep adding them forever, can you? Second, heat and short circuits are a problem. The older batteries get, the greater the fire risk. Right now it might not look like much of an issue, but in a year or two there’ll be fires breaking out everywhere. Third, the efficiency isn’t great either. A lot of power is wasted during charging and discharging. Fourth, efficiency drops depending on temperature. In winter, they probably won’t even perform at eighty percent. Fifth, batteries lose maximum capacity the longer you use them, and disposing of used batteries is a problem too. Renewable energy is supposed to protect the environment, so what would be the point if we damaged it in the process?”
I lifted my head.
“Should I keep going?”
Chairman Heo shook his head.
“That’s enough. So what’s the alternative?”
“As you know, hydrogen. If you use electricity generated by solar and wind to make hydrogen, every one of those problems is solved. Hydrogen is easy to store and transport, there’s no fire risk, and its efficiency doesn’t drop with temperature.”
“Solar alone should be enough. Why bother with wind as well?”
“Hwaan Group has Hwaan Heavy Industries, and Hwaan Heavy Industries is in the offshore plant business. That goes hand in hand with wind power.”
“What do you mean by that?”
“Whether it’s solar or wind, if you’re generating power, you have to connect it to the grid. But if you focus only on hydrogen production, the story changes.”
Whether by solar or wind, the electricity produced had to be sent somewhere through power lines. That was called grid connection.
Heo Min-woong let out an exclamation as though he’d figured it out.
“Ah!”
I nodded.
“If you don’t connect to the grid, hydrogen production can happen anywhere. You could build a wind farm out at sea where nothing exists, produce hydrogen there, and move it by pipeline or ship. You could even build a floating offshore wind farm, like a drilling rig, and shift its position according to the season and wind direction to maximize output.”
It sounded exaggerated, but Europe, where renewable energy made up a large share of power generation, was already planning a similar business within three years.
“Even if you make all that hydrogen, isn’t it useless if there’s no demand?”
“Supply will create the demand. Hydrogen can be used not only as vehicle fuel, but also as fuel for ships, machinery, and power plants.”
From an ordinary person’s perspective, it might be hard to understand why a few automakers were staking everything on hydrogen vehicles.
The reason was simple: hydrogen was a next-generation energy source.
Building hydrogen stations just to refuel hydrogen cars, and producing hydrogen just to put it into those stations, might seem terribly inefficient.
And yet if we could produce massive quantities of hydrogen, as though pulling oil from the ground, then hydrogen cars, hydrogen ships, hydrogen aircraft, and hydrogen power plants would all have to be built to use it.
“Renewable energy is, quite literally, energy that can be created endlessly on Earth. Up until now, we just had no way to store it. But now the path has opened to turn it into hydrogen and keep it stored that way. If we want to seize this market, then the group’s capabilities need to be concentrated entirely on hydrogen. No, better yet, the group itself should be reorganized around hydrogen.”
Within ten years, hydrogen would not completely replace oil and natural gas. But even capturing only a portion of the overall energy market would still mean trillions of dollars.
Even now, energy remained the undisputed number one in global trade.
After a brief silence, Chairman Heo spoke.
“Everyone knows hydrogen is a major energy source of the future. But no matter how enormous the market may become someday, we can’t just pour money into it indefinitely until then.”
“The beginning of the hydrogen economy is vehicle fuel. Vehicle fuel accounts for as much as twenty percent of the entire energy market. Through that, we can build a revenue model right away.”
“Even if we build stations, they’ll be useless if there are no hydrogen cars.”
“Daeyang Motors and Toyota are already producing hydrogen cars, aren’t they?”
“That’s nowhere near enough. If it doesn’t become mainstream, it won’t mean much. Originally, I’d expected Thomas Motors to fill that role, but the result is what we all know.”
In truth, there was another company that would be the one to open the hydrogen car era in earnest.
“You don’t need to worry about that part. There’s a company with real technical muscle.”
“Which one are you talking about?”
I answered as though I’d been waiting for the question.
“A company called Nextrogen, in the United States.”
Heo Min-woong asked, “You mean that startup making a hydrogen-car platform?”
I nodded.
“Yes. It’s a company building the underbody that connects the fuel-cell stack, the high-pressure hydrogen tank, and the motor. They plan to make a standardized modular platform and sell it to automakers. As you know, a car requires a huge amount of know-how beyond just the powertrain. Existing automakers already have that know-how. They just don’t have the technical ability to make hydrogen cars or EVs. But if they mount their various parts and bodywork on the platform Nextrogen built, the car is complete. That way, even companies without hydrogen-car technology can make them as much as they want. And because they’re collaborating with established automakers on production, they can get cars to market quickly.”