2012 ANNUAL REPORT. Aiming

Transcription

1 2012 ANNUAL REPORT Aiming High

2 table of contents 03 Corporate Profile 04 Message from the Chairman 06 Message from the CEO 08 Aiming High 14 Review of Operations 24 Financial Section 38 Affiliates 40 Global Network STX Offshore & Shipbuilding is the world s only shipbuilding group that can build all types of ships based on its global production network linking Korea, China, and Europe. Corporate Profile STX Offshore & Shipbuilding has played a leading role in the development of the nation s shipbuilding industry based on extensive experiences of 45 years, cutting-edge technologies and world s highest productivity. The company has a global competitiveness in building high value-added vessels including LNG carrier, cruise ship, very large ore carrier (VLOC), and shuttle tanker; offshore plants including floating storage & offloading (FSO) and drillship; and special purpose vessels. Its outstanding products and advanced technologies have been widely recognized by its customers in the world. In particular, we are currently striving to win new orders for offshore plants in order to leapfrog into a global shipbuilder with strong expertise in the offshore industry. STX Offshore & Shipbuilding is also boasting the most advanced eco-friendly shipbuilding technologies. Back in 2009, we successfully developed a new ecofriendly ship STX GD (Green Dream Project) ECO-Ship, which drastically reduces gas emissions and cuts down more than 50% of fuel costs, and applied to the design of various types of ships including LNG carrier, ultra-large container ship and tanker, which has appealed many customers in the global market. We will continue to enhance our business structure through technology innovation, new construction method development, and aggressive investment in R&D, and lead the shipbuilding industry by maximizing operational efficiency of the global production network.

3 04 RESHAPING ANNUAL REPORT Message From The Chairman Message from the Chairman STX Group will make best efforts to overcome current tough business environment by rearming itself with creative efforts and positive thinking. Dear shareholders and customers, I extend my sincere gratitude for your continuous interest and support for STX Group. Last year was the most challenging year in the history of our businesses due mainly to continued global economic recession and lingering slump in the shipping and shipbuilding industry, our mainstay businesses, for 5 years since the Lehman crisis. The year 2013 is also expected to witness a cutthroat market competition from unfinished EU sovereign debt crisis and uncertainties in the business environment. In this regard, STX Group has set sustainability management through survival as its management policy in 2013 and suggested 4 key practical tasks to achieve this goal. First, we will put our efforts into receiving new orders and pioneering new markets. Since our businesses are mostly based on manufacturing activities, winning new orders is considered the top priority for survival. Thus, we will make utmost efforts to achieve new order targets in 2013 by focusing enterprise-wide capabilities and resources on consolidating our position in key markets, enhancing power and plant engineering businesses, and pioneering new niche markets. Second, we will maximize profitability and liquidity by securing fundamental competitiveness. Given that economic recession provides a consumer-dominant market, failing to meet the customers price demands results in decreases of new orders and profitability. In this regard, STX will improve the fundamentals so as to flexibly respond to market changes through cost structure innovation, and strengthen the Group s competitiveness in manufacturing. Third, we will streamline our business process. Based on a thorough feasibility analysis, profitability will be given the number one priority. Marginal businesses will be closed down and efficiency will be maximized by streamlining management resources such as technology, facility, and personnel through the reorganization. In particular, investment and cost execution processes will be reestablished to fundamentally prevent the dissipation of management resources. Fourth, we will strive to enhance our risk management capability and cultivate high-caliber talents. In the times of uncertainty, a company s future depends on its risk management capability and human resources. Thus, we will improve our risk management capability enough to flexibly and promptly deal with external environmental changes, while focusing on talent cultivation which is the prerequisite to survival and sustainability management. Arnold J. Toynbee once said, Civilizations continue to grow only when they meet one challenge only to be met by another, but deteriorate due to a worship of their former self. In 2013, STX Group will make best efforts to effectively overcome current tough business environment based on flexible response to risks and strong will for another takeoff. In addition, the four key practical tasks stated above will be aggressively executed to achieve the goal of achieving KRW38 trillion in new orders and KRW28 trillion in sales, and to increase operating profit. We are very grateful for your interest and affection, and wish you and your family good health and happiness. Chairman Duk Soo Kang

4 06 RESHAPING ANNUAL REPORT Message from the CEO Message from the CEO We will set Securing the Foundation for Sustainable Survival as 2013 management policy, and concentrate on business restructuring and the enhancement of profitability and capability. To our valued shareholders and customers! I would like to extend my deepest gratitude for your unwavering interest and support for the development of STX Offshore & Shipbuilding. To overcome unfavorable market conditions in the shipbuilding industry last year, we did our utmost efforts to solidify the foundation for growth based on the goal of securing the fundamental competitiveness. As a result, we were able to make meaningful achievements: won a series of new orders for high value-added offshore plants such as mega-scale FSO; completed the first stage of construction of its subsidiary Goseong Shipyard that would be a base for offshore plant sector; and, developed eco-friendly and high value-added large containerships and LNG carriers. These efforts have led to a USD 4.9 billion worth of new orders in This year is expected to bring about a more severe business environment than last year due to the global economic recession. However, our executives and employees will pull together with one accord to turn a crisis into an opportunity. We will set Securing the Foundation for Sustainable Survival as 2013 management policy, and concentrate on business restructuring and the enhancement of profitability and capability. First of all, our business portfolio will be reshaped to build high value-added vessels such as offshore plants and gas carriers in addition to commercial ones. Offshore plants, which have been constructed in Dalian, China, will be also built at home to meet the increasing market demands. To that end, we will overhaul the system, process and facilities, and stabilize them in early stages so that we can boost cooperation among Jinhae Shipyard, Dalian Shipyard, and Goseong Shipyard. Second, profitability will be maximized by reducing the inefficiency in every business division and enhancing productivity through automation and unitization. Moreover, profit realization and cash flow will be considered the most important factors from the stage of order-receiving, while significant efforts will be put into securing cash flow in advance. Third, our QHSE management capability will be enhanced. In particular, offshore plant construction, unlike commercial vessels, requires zero-defect quality control and safety management not only of finished goods but also in shipbuilding process. Thus, we will live up to our world-renowned reputation by meeting the requirements of the world s leading shippers for high quality service and safety standards. Under the above business strategies, we will make all-out efforts to attain the goal of USD 7.0 billion in new orders and KRW4.0 trillion in sales in I would like to thank our shareholders and customers for continued interest and support once again, and wish you and your family good health and happiness. President & CEO Sang-Ho, Shin

5 08 RESHAPING ANNUAL REPORT Leap toward a major company in the offshore plant market The year 2012 provided a foothold for STX Offshore & Shipbuilding to leap toward a major company in the offshore plant market. The ultra-large FSO with a capacity of 2.2 million barrels, which had been ordered by a Middle East oil company in 2008, were successfully built and delivered in early In September, we received an additional order for a FSO with a capacity of 1.5 million barrels worth USD 430 million from a South-African oil company. This contract allowed us to be engaged in deep-sea EPCIC (engineering, procurement, construction, installation and commissioning) services including submarine pipeline system, and it gave a chance to officially debut in the subsea sector. Especially, the drillship Noble Globetrotter Ⅰ that we delivered in May 2011 go a perfect score on the world drillship performance evaluation in July, solidifying our position as the world s leading drillship builder. STX Offshore & Shipbuilding will strive to win more new orders for high value-added megascale offshore plants, and stimulate offshore plant construction in Jinhae Shipyard and Goseong Shipyard following Dalian Shipyard to leap toward the world s best shipbuilding base.

6 10 RESHAPING ANNUAL REPORT Win remarkable achievements in new orders despite tough market conditions The adverse market conditions in 2012 could not set back our efforts to win new orders for 121 ships or around USD 9.4 billion based on our global network linking Korea, China, and Europe. New orders in amount increased 38.8% from a year ago. STX Europe solidified its position as the world s best cruise ship builder once again: STX Finland signed a contract with TUI Cruises of Germany to build a mega-scale luxurious cruise ship of 99,330 tons, and STX France received an order for the world s largest cruise ship of 225,000 tons from Royal Caribbean International of the USA. Jinhae Shipyard also received a series of new orders from early 2012, including two 170,000 CBM class LNG carriers from Sovcomflot of Russia and one 155,000 DWT class shuttle tanker from a Greek shipper, and secured a considerable amount of new orders for various ships including LNG carriers, LPG carriers, mid and large-sized tankers, containerships, RO/RO ships, and warships. STX Dalian was recognized for its competence in commercial ship building by obtaining orders for four 51,000 product carriers from a Singaporean shipper and four 50,000 product carriers from a European shipper in May, and ten 5,000 TEU class containerships from a European shipper in June. STX Offshore & Shipbuilding will strive to maximize synergy among its shipyards across the globe, while solidifying its status as a global leading shipbuilder through aggressive efforts to win new orders.

7 12 RESHAPING ANNUAL REPORT Demonstrate the world-class technologies In April 2012, STX Offshore & Shipbuilding entered into a contract with a Canadian shipyard in Vancouver on offering technologies for the first stage of modernization, and began to export its know-how of shipyard design and operation. In addition, the company signed a JVA (Joint Venture Agreement) with a state-run Russian shipbuilder USC (United Shipbuilding Corporation) in June to support design works and personnel training for USC s New Admiralty Shipyard project. We could be selected as USC s partner since it recognized the excellent design and quality of our LNG carriers ordered from Russia s national shipping company, Sovcomflot. Meanwhile, our LNG FEGaSuS, Floating Electric & Gas Supply Station received the Knowledge Economy Minister s Award at the 2012 Korea Technology Awards. The LNG FEGaSuS, which adds power generation and bunkering station technologies to LNG marine terminal that supplies LNG to the land, has enabled us to create synergy among the Group s mainstay businesses of shipbuilding, shipping and energy, and also to emerge as the leader in the offshore combined-cycle power plant market. STX Offshore & Shipbuilding will secure a differentiated competitive edge through continuous technology innovation and new construction method development, and also actively engage in new business development.

8 14 RESHAPING ANNUAL REPORT Review of Operations STX Offshore & Shipbuilding is recognized for its high capabilities of designing and building high value-added vessels including LNG/LPG carriers and ultra-large cruise ships, and offshore plants including FSOs, drill ships and heavy lift crane vessels. In 2012, the company won new orders for 121 ships worth USD 9.4 billion, up by 38 ships or USD 2.6 billion from a year ago, thanks to its aggressive sales activities based on the global production network. The order backlogs as of the end of 2012 stood at 269 ships or USD 22.1 billion. table of contents 16 LNG/LPG Carriers l Offshore 18 VLCC & Product Tankers l Containership 20 VLOC & BULK Carriers 22 STX Europe l STX Dalian

9 16 RESHAPING ANNUAL REPORT LNG/LPG Carriers l Offshore LNG/LPG CARRIERS We are tightening our grip on the LNG/LPG carrier market based on the world-class design and shipbuilding technologies, and demonstrating leadership in the eco-friendly vessel market which witnesses increasing demands. Offshore We are highly recognized in the offshore plant market which requires high level of technologies. Our efforts to obtain more orders for offshore plants will contribute to enhancing our business structure. LNG/LPG CARRIERS Building LNG/LPG carriers with the highest performance in each class STX Offshore & Shipbuilding s NO 96 Type LNG carrier is equipped with the dual fuel generator engine to increase engine room efficiency and cargo tank capacity. In particular, boasting the largest capacity among LNG carriers with four cargo tanks, it meets the requirements of shippers and provides high safety. Meanwhile, our IMO 2G Type 9,000 CBM LPG and Ethylene carriers demonstrate the highest performances in their classes, and especially, an independent cylindrical cargo tank is mounted to drastically reduce the weight through optimal structure alignment. Winning meaningful new orders A number of new orders came in the LNG carrier sector in The company signed a contract with Russia s Sovcomflot to build two 170,000m3 class LNG carriers in March, while winning a contract with a European shipper to construct one 160,000m3 class LNG carrier worth USD 200 million. We also reached a JVA (Joint Venture Agreement) with Russia s state-owned shipyard USC to engage in winning new LNG carrier orders from Russia, which increases expectations for more new orders in the future. The LPG carrier sector also secured several meaningful new orders: two 5,000CBM class LPG carriers from a Greek shipper Brave Maritime Corporation in March, and two 6,500CBM class LPG carriers from another Greek shipper in May. Furthermore, we signed a contract with Ultragas Group to build four 22,000CBM class LPG carriers. Offshore LNG FLOATER LNG FPSO / FSRU / SRV In June 2012, we signed a MOU with KOGAS on Joint development of new technologies and businesses of natural gas, and are spurring the development of LNG FPSO FEED technology, LNG FSRU/FSRPU technology, compact facilities for reliquefaction and DME FPSO technology as well as of new businesses related to oil and gas. FLOATING STORAGE & PRODUCTION UNIT FPSO / FSO / FPU / FPSS / SPAR Our leadership is being magnified in the FSO market by receiving an order for a FSO, which is worth USD 430 million and capable of storing crude oil of 1.5 million barrels, from a North African oil company in September. We are also entering into the business of ultra-large offshore plants such as FLNG and FPSO. DRILLING RIG Drillship / Semi-Submersible Rig / Jack-Up Rig Drilling rig is a high value-added unit that drills underwater oil well and requires high level of technologies. Our products range from jackup rigs used in a shallow sea that is about 200m deep to semi-submersible rigs operated in a deep sea up to 3,000m deep and drill ships. OFFSHORE SUPPORT VESSEL PLCV / HLCV / OSCV / WTIV STX Offshore & Shipbuilding is expanding its market share in the offshore facility sector by producing offshore support vessels needed to carry out a variety of offshore work such as pipe laying, decommissioning and heavy lifting, offshore construction and wind turbine installation. FIXED PLATFORM STX Offshore & Shipbuilding is increasing its ability to perform a series of work ranging from design, purchase, production and delivery, to installation and is improving its capability to win more orders in order to strengthen its presence in the offshore market.

10 18 RESHAPING ANNUAL REPORT VLCC & Product Tankers l Containership VLCC & Product Tankers We are building a variety of ships with the best performance among equals ranging from midsized tankers to VLCC through continuous technology development. Containership VLCC & Product Tankers Securing a leading competitive edge in the product tanker market Our product tankers are designed for multiple purposes to transport chemical products as well as crude oil and refined oil products. Moreover, they have double-hull structures and proven to be safe and eco-friendly by major international ship classification associations, boasting the highest capacity and speed among similar class tankers. These competitive advantages have contributed to our dominating the global Handymax and Panamax class product tanker market for many years, and extend our reach to the high value-added VLCC market. Through continuous technology development, we now build highly efficient vessels that exceed the standards required by IMO s EEDI (Energy Efficiency Design Index). This allows shipping companies to reduce operation costs and increase profits. Containership Leading the eco-friendly and high-efficiency large containership market Our containerships boast an outstanding hull form, the most optimal container loading capacity as well as low vibration and high speed thanks to our own technologies. We have successfully constructed and delivered ultra-large 13,000 TEU class containerships called Dream Containership, and shown off our cutting-edge technologies by developing the world s first 22,000TEU class containership in May 2008, which had been considered hard to build in terms of technological and economic aspects. The global containership market is currently witnessing the trend surging demands for high-efficiency vessels. In order to lead such market trend, we developed GD (Green Dream Project) ECO-Ship in 2009, which dramatically reduces exhaust gas emissions and cuts down fuel costs by more than 50%. We are taking the lead in the field of green ships by constructing eco-friendly container ships with the most optimal container loading capacity and operation performance based on further advanced shipbuilding technologies. Proving global competitiveness with a series of new orders In 2012, a number of new orders came in from the start of the year. We signed a contract with a Greek shipper in January to build one 155,000DWT class DP2 (Dynamic Positioning System 2) shuttle tanker, and received an order for six 50,000DWT class tankers from the world s largest tanker owner John Fredriksen Group in February. In addition, the company won a contract with a U.S shipper Alterna in April to build two 50,000DWT class tankers, and additional four tankers of the same kind in May and June. The new orders in the first half of 2012 reach 13 ships or USD 500 million. In January 2013, two 155,000DWT class shuttle tankers of the world s largest size were successfully delivered to a Greek shipper European Navigation. Winning an order for 45,000DWT class container Ro-Ro vessels In July 2012, STX Offshore & Shipbuilding received an order from Ignazio Messina & C. S.p.A. of Italy to build four 45,000DWT class container Ro-Ro vessels. The newly-ordered hybrid ships are worth USD 300 million and capable of transporting containers as well as automobiles. We will continue to strengthen our competitiveness in winning new orders for and building ultra-large containerships to which eco-friendly technologies are applied.

11 20 RESHAPING ANNUAL REPORT VOLC & BULK Carriers VLOC & BULK Carriers We boast cutting-edge technologies and high quality to build bulk carriers from Handymax class to Panamax and Capesize classes, through which we build a strong relationship with global ship owners. Developing the world s largest hull form STX Offshore & Shipbuilding has its own technologies to build bulk carriers ranging From Handymax to Panamax, Capesize classes. Our bulk carriers boast the world s top safety and economical feasibility thanks to intensive research of hull structure. Indeed, this carrier uses the TIER-II engine that consumes less fuel per unit hour than the existing marine diesel engines to reduce emissions of noxious gases such as NOx, SOx and CO2. It also uses higher tensile steel that allows lighter hull weight, higher fuel economy and faster speed. In addition, the company built a 298,000DWT class VLOC with the largest cargo loading capacity in its class, which drew acclaim from major shippers around the world. In 2009, we successfully developed the world s largest 400,000DWT class hull form, which maximizes fuel efficiency through hull weight reduction, and received an order for and built a VLOC of the same class. This vessel was independently researched, designed and built by STX Offshore & Shipbuilding. It is able to load another 40,000 tons of cargo backed by increased cargo tank capacity by more than 20%, and boasts a capability to load 16,000 tons of cargo per hour by high-capacity ballast water treatment system. Meanwhile, STX Offshore & Shipbuilding had signed a contract with a Turkish shipper Densa Group to build one 181,000DWT class bulk carrier, two 83,000DWT class bulk carriers, and two 58,000DWT class bulk carriers in 2010, and successfully delivered all of them by the end of Densa Group sent us a message to express their gratitude for the outstanding quality of the delivered ships and willingness for a continuous partnership with us. We will continue to reinforce our technological competence in the field of high value-added ultra-large bulk carrier, and live up to the reputation as the world s best shipbuilder. 400,000 dwt ore carrier 298,000 dwt ore carrier 250,000 dwt ore carrier 181,000 dwt bulk carrier 105,000 dwt bulk carrier 75,000 dwt bulk carrier 58,000 dwt bulk carrier

12 22 RESHAPING ANNUAL REPORT STX Europe l STX Dalian STX Europe STX Europe has excelled in building cruise ships, which has been proven by its construction of the world s top 15 cruise ships in size including Oasis of the Seas and Allure of the Seas, the largest cruise ships in the world. STX Dalian STX Dalian is the world s largest shipbuilding complex with a specialized vertical production system that makes it possible to process raw materials, assemble engines, manufacture blocks, build ships and produce offshore and industrial plants all together. STX Europe Creating a new paradigm of cruise ships Cruise ship construction requires a rich experience and skilled personnel. STX Finland and STX France, the subsidiaries of STX Europe, have accumulated the knowledge of building ships for humans through the history of around 400 years. Such experiences have been combined with creative ideas to develop the world s first open-air cabin system and on-cruise park system, opening a new horizon of the global cruise ship market. In 2012, STX Finland won a contract with TUI Cruises of Germany to construct one mega-scale luxurious cruise ship of 99,300 tons. Furthermore, STX France signed a contract with Royal Caribbean International of the USA to build two ultra-large cruise ships of 225,000 tons (including optional one ship), solidifying its position as the world s best ultra-large cruise ship builder. The newly ordered cruise ship is the 361-meter long and 66-meter wide cruise ship is called floating city on the sea thanks to its 2,700 cabins which can accommodate up to 9,400 passengers and crew members. STX Europe s order backlog as of the end of 2012 stood at 62 ships or USD 9.2 billion, and that in cruise and ferries reaches 13 ships or USD 5.2 billion. STX Dalian Taking the lead in the fields of high valueadded vessels and offshore plants based on independent technologies Supported by its vertical production system for ships and machinery, the shipyard is marching toward its primary goal of becoming a global major shipyard and engine maker. A number of new orders for various types of vessels in 2012 once again confirmed the shipyard s global competitiveness. STX Dalian received orders for four 50,000DWT class tankers from Tanker Pacific of Singapore in April, two 50,000DWT class tankers from Seatankers Management of Norway and ten 5,000TEU class containerships from a European shipper in June. In July, STX Dalian successfully delivered the world-class vessels in succession including a drillship called Noble Globetrotter II and a VLOC called Vale Espirito Santo, cementing its position as a comprehensive shipbuilding complex. In particular, the Noble Globetrotter II which began drilling operation in the Gulf of Mexico in July 2012 gained recognition as the world s best drillship by receiving a perfect score in the world drillship performance evaluation released by PFC Energy, an international consulting firm specialized in the oil and gas industry. STX Dalian s new orders in 2012 stood at 24 ships or USD 1.1 billion, and its order backlog as of the end of 2012 reached 49 ships or USD 2.3 billion.

13 ANNUAL REPORT 24 RESHAPING ANNUAL REPORT Financial Section Financial Section Independent Auditors Report on Consolidated Financial Statements The Board of Directors and Stockholders STX Offshore & Shipbuilding Co., Ltd.: We have audited the accompanying consolidated statements of financial position of STX Offshore & Shipbuilding Co., Ltd. and its subsidiaries (the Group ) as of December 31, 2012 and 2011, and the related consolidated statement of comprehensive income (loss), changes in equity and cash flows for the years then ended. Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with Korean International Financial Reporting Standards. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We did not audit the consolidated financial statements of STX China Shipbuilding Holdings Co., Ltd. and certain other subsidiaries, whose financial statements reflect total assets constituting 51.0% and 50.4% of consolidated total assets (before elimination of intercompany transactions) as of December 31, 2012 and 2011, and sales constituting 54.0% and 52.2% of consolidated sales (before elimination of intercompany transactions) for the years then ended. Those financial statements were audited by other auditors whose reports have been furnished to us, and our report, insofar as it relates to these subsidiaries, is based solely on the reports of other auditors. We conducted our audits in accordance with auditing standards generally accepted in the Republic of Korea. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. In our opinion based on our audits and the reports of other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Group as of December 31, 2012 and 2011, and its financial performance and its cash flows for the years then ended, in accordance with Korean International Financial Reporting Standards. Without qualifying our opinion, we draw attention to the following: (a) Discontinued operations As described in note 5, the Group classified STX Heavy Industries Co., Ltd., STX OSV Holdings Ltd. and subsidiaries which the Group has control indirectly through STX Heavy Industries Co., Ltd. and STX OSV Holdings Ltd. as discontinued operations in As a result, the consolidated statement of comprehensive income for the year ended December 31, 2011 has been restated for comparative purpose. table of contents 25 Independent Auditors Report on Consolidated Financial Statements 26 Consolidated Statements of Financial Position 28 Consolidated Statements of Comprehensive Income 30 Consolidated Statements of Changes in Equity 31 Consolidated Statements of Cash Flows 32 Independent Auditors Report on Non-consolidated Financial Statements 33 Non-consolidated Statements of Financial Position 35 Non-consolidated Statements of Comprehensive Income 36 Non-consolidated Statements of Changes in Equity 37 Non-consolidated Statements of Cash Flows (b) Transactions with related parties As described in note 29, the Group has sales and purchase transactions with related parties such as STX Corporation, and the amount of related balances due to or from related parties are recorded as of December 31, 2012 and In addition, the Group provides payment guarantees to China Construction Bank and other banks for borrowings of the related parties such as STX (Dalian) Engine Co., Ltd. and advances from customers. As described in note 31 to the consolidated financial statements in 2012, STX Group including the Group had entered into a financial structure improvement agreement with its main creditor bank, Korea Development Bank. The procedures and practices utilized in the Republic of Korea to audit such consolidated financial statements may differ from those generally accepted and applied in other countries. Accordingly, this report and the accompanying consolidated financial statements are for use by those knowledgeable about Korean auditing standards and their application in practice. KPMG Samjong Accounting Corp. Seoul, Korea March 20, 2013 This report is effective as of March 20, 2013, the audit report date. Certain subsequent events or circumstances, which may occur between the audit report date and the time of reading this report, could have a material impact on the accompanying consolidated financial statements and notes thereto. Accordingly, the readers of the audit report should understand that the above audit report has not been updated to reflect the impact of such subsequent events or circumstances, if any.

14 26 RESHAPING ANNUAL REPORT Financial Section Consolidated Statements of Financial Position As of December 31, 2012 and 2011 Consolidated Statements of Financial Position As of December 31, 2012 and 2011 (In millions of won) Assets Cash and cash equivalents 423,793 1,257,767 Other financial assets 194,816 88,204 Available-for-sale financial assets 20 9,500 Trade receivables 203, ,472 Due from customers for contract work 2,266,881 2,969,204 Advance payments 293, ,969 Prepaid expenses 114, ,937 Other receivables 289, ,011 Inventories 291, ,069 Financial derivative assets 35,199 53,473 Firm commitment assets - 161,861 Assets held for sale 4,304,979 - Total current assets 8,418,213 6,682,467 Other financial assets ,532 Available-for-sale financial assets 132, ,445 Other investments 4,763 11,430 Investments in associates 133, ,659 Long-term trade receivables 53,369 34,949 Long-term due from customers for contract work - 454,962 Long-term prepaid expenses 22,337 24,729 Other receivables 88, ,002 Property, plant and equipment 4,063,972 4,917,918 Intangible assets 406, ,544 Financial derivative assets 28, Firm commitment assets - 25,449 Deferred tax assets 159, ,337 Total non-current assets 5,093,704 7,227,418 Total assets 13,511,917 13,909,885 (In millions of won) Liabilities Short-term borrowings 2,262,382 2,274,758 Current portion of long-term borrowings 303, ,887 Short-term bonds 349, ,000 Current portion of bonds 563, ,799 Bond with stock purchase warrants 98, ,326 Trade payables 1,190,979 2,182,311 Other payables 707, ,299 Accrued expense 826, ,025 Other current liabilities 60, ,296 Income tax payables ,940 Advances from customers 33, ,732 Due to customers for contract work 1,118,488 1,734,279 Provisions 52, ,545 Dividends payable - 3,491 Financial derivative liabilities 7, ,088 Firm commitment liabilities 63, ,345 Liabilities held for sale 3,374,934 - Total current liabilities 11,014,354 9,447,121 Bonds 199, ,277 Bond with stock purchase warrants 149,327 97,059 Long-term borrowings 665, ,453 Finance lease liabilities 27,218 64,468 Other non-current liabilities 16,483 51,738 Provisions 43,800 60,629 Defined benefit liabilities 34,008 41,026 Financial derivative liabilities ,503 Firm commitment liabilities 21, Deferred tax liabilities 24, ,555 Total non-current liabilities 1,182,738 2,286,107 Total liabilities 12,197,092 11,733,228 Equity Share capital 214, ,075 Capital surplus 301, ,534 Treasury shares (6,736) (6,736) Other equity 214, ,191 Retained earnings 11, ,028 Equity attributable to owners of the Parent Company 734,786 1,385,092 Non-controlling interests 580, ,565 Total equity 1,314,825 2,176,657 Total liabilities and equity 13,511,917 13,909,885

15 28 RESHAPING ANNUAL REPORT Financial Section Consolidated Statements of Comprehensive Income For the years ended December 31, 2012 and 2011 Consolidated Statements of Comprehensive Income For the years ended December 31, 2012 and 2011 (In millions of won, except earnings (loss) per share information) Continuing operations Sales 6,221,198 7,407,699 Cost of sales (6,668,757) (7,146,960) Gross profit (loss) (447,559) 260,739 Selling, general and administrative expenses (251,129) (251,037) Operating profit (loss) (698,688) 9,702 Other income 15,337 17,086 Other expenses (85,303) (14,848) Finance income 648, ,526 Finance costs (897,163) (1,015,465) Share of profit of equity method accounted investees 8,501 3,640 Share of loss of equity method accounted investees (28,940) (6,682) Profit (Loss) before income taxes (1,038,219) (171,041) Income tax benefit (expense) 143,377 (21,314) Profit (Loss) from continuing operations (894,842) (192,355) Discontinued operations Profit from discontinued operations 112, ,968 Profit (Loss) for the year (782,008) 168,613 (In millions of won, except earnings (loss) per share information) Profit (Loss) attributable to owners of the Parent Company: Loss from continuing operations (697,430) (81,286) Profit from discontinued operations 21, ,401 Total profit (loss) attributable to owners of the Parent Company (675,472) 71,115 Profit (Loss) attributable to non-controlling interests: Loss from continuing operations (197,412) (111,069) Profit from discontinued operations 90, ,567 Total profit (loss) attributable to non-controlling interests (106,536) 97,498 Profit (Loss) for the year (782,008) 168,613 Total comprehensive income (loss) attributable to: Owners of the Parent Company (707,968) 86,815 Non-controlling interests (155,182) 106,166 Total comprehensive income (loss) for the period (863,150) 192,981 Earnings (Loss) per share Basic earnings (loss) per share (7,986) 906 Diluted earnings (loss) per share (8,014) 877 Other comprehensive income (loss) Net change in fair value of available-for-sale financial assets 6,023 (6,142) Defined benefit plan actuarial gain (loss) (2,071) 3,689 Change in other comprehensive income items of equity method investments (21,431) (12,382) Foreign currency translation differences foreign operations (108,298) 22,141 Revaluation of property, plant and equipment 44,635 17,062 Total other comprehensive income (loss) for the year, net of tax (81,142) 24,368 Total comprehensive income (loss) for the year (863,150) 192,981

16 30 RESHAPING ANNUAL REPORT Financial Section Consolidated Statements of Changes in Equity For the years ended December 31, 2012 and 2011 Consolidated Statements of Cash Flows For the years ended December 31, 2012 and 2011 (In millions of won) Share capital Capital surplus Treasury shares Other equity Retained earnings Owners of the parent company Noncontrol-ling interests Total equity Balance at January 1, , ,976 (6,736) 239, ,922 1,204, ,124 1,514,753 Total comprehensive income for the period Profit for the year ,115 71,115 97, ,613 Net change in fair value of available-for-sale financial assets (6,136) - (6,136) (6) (6,142) Actuarial gains ,689 3,689-3,689 Revaluation surplus ,665-15,665 1,397 17,062 Changes in equity method accounted investees' capital - 22,211 - (34,574) (22) (12,385) 3 (12,382) Foreign currency translation differences foreign operations ,868-14,868 7,273 22,141 Total comprehensive income for the period - 22,211 - (10,177) 74,782 86, , ,981 Transactions with owners, recorded directly in equity Dividends paid (15,136) (15,136) - (15,136) Dividends distribution to non-controlling interests (45,330) (45,330) Stock warrants exercised 6,974 34, ,156-41,156 Issuance of stock warrants Increase in non-controlling interests from acquisition of business - 13, , , ,380 Changes in non-controlling interests - 60, , , ,662 Share-based payment transactions (6,512) - (6,512) - (6,512) Transfer to legal reserve ,514 (1,514) Others (26) (26) - (26) Total transactions with owners recorded directly in equity 6, ,347 - (4,998) (16,676) 93, , ,923 Balance at December 31, , ,534 (6,736) 224, ,028 1,385, ,565 2,176,657 Balance at January 1, , ,534 (6,736) 224, ,028 1,385, ,565 2,176,657 Total comprehensive income for the period Loss for the year (675,472) (675,472) (106,536) (782,008) Net change in fair value of available-for-sale financial assets ,023-6,023-6,023 Actuarial losses (2,071) (2,071) - (2,071) Revaluation surplus , ,635-44,635 Changes in equity method accounted investees' capital - (23,006) - (2,014) 3,590 (21,430) (1) (21,431) Foreign currency translation differences foreign operations (59,653) - (59,653) (48,645) (108,298) Total comprehensive loss for the period - (23,006) - (11,041) (673,921) (707,968) (155,182) (863,150) Transactions with owners, recorded directly in equity Dividends paid (15,694) (15,694) - (15,694) Dividends distribution to non-controlling interests (135,529) (135,529) Stock warrants exercised 15,290 34, ,016-50,016 Issuance of stock warrants - 1, ,337-1,337 Changes in non-controlling interests - 2, ,028 22,674 79, ,859 Share-based payment transactions (671) - (671) - (671) Transfer to legal reserve ,569 (1,569) Total transactions with owners recorded directly in equity 15,290 38, ,765 57,662 (56,344) 1,318 Balance at December 31, , ,237 (6,736) 214,048 11, , ,039 1,314,825 (In millions of won) Cash flows from operating activities Cash provided by operating activities 205, ,826 Interest received 24,385 31,007 Dividends received 13,240 4,790 Income tax paid (204,330) (103,730) Net cash provided by operating activities 38, ,893 Cash flows from investing activities Decrease in other financial assets 16,195 19,592 Proceeds from sale of available-for-sale financial assets 114,599 18,585 Collection of other receivables 9,091 80,421 Proceeds from sale of investments in associates 121, Disposal of subsidiaries 17, ,286 Proceeds from government grants Proceeds from sale of property, plant and equipment 14,115 65,910 Proceeds from sale of intangible assets 10, Decrease in other investments Increase in other financial assets (412,695) (36,276) Purchase of available-for-sale financial assets (125,032) (17,181) Increase in other receivables (30,171) (35,806) Purchase of investments in associates (27,470) (22,335) Acquisition of business, net of cash acquired (20,000) (106,798) Increase in other investments - (5) Repayment of government grants - (107) Purchase of property, plant and equipment (392,300) (515,256) Purchase of intangible assets (2,537) (6,302) Net cash used in investing activities (706,222) (297,095) Cash flows from financing activities Proceeds from short-term borrowings 4,375,787 2,716,858 Proceeds from issuance of bond with stock purchase warrants 195,789 97,746 Proceeds from issuance of bonds 828, ,694 Proceeds from long-term borrowings 315, ,545 Proceeds from issuance of shares for warrants exercised 2,967 36,324 Equity contributions from non-controlling interests 90, ,120 Repayments of short-term borrowings (3,541,931) (3,152,011) Repayments of current portion of long-term borrowings (347,516) (108,136) Repayments of current portion of finance lease liabilities (21,142) (13,404) Repayments of bonds (945,000) (599,240) Repayments of bond with stock purchase warrants (169,125) (23,207) Repayments of long-term borrowings - (146,194) Dividends paid (160,468) (60,466) Interest paid (273,005) (251,280) Net cash provided by (used in) financing activities 350,452 (256,651) Net decrease in cash and cash equivalents (317,290) (432,853) Cash and cash equivalents at beginning of year 1,257,767 1,559,631 Effect of exchange rate fluctuations on cash held (35,717) 7,147 Effect of change in scope of consolidation - 123,842 Cash and cash equivalents of asset group held for sale (480,967) - Cash and cash equivalents at end of year 423,793 1,257,767

17 ANNUAL REPORT 32 RESHAPING ANNUAL REPORT Financial Section Independent Auditors Report on Non-consolidated Financial Statements The Board of Directors and Stockholders STX Offshore & Shipbuilding Co., Ltd.: We have audited the accompanying separate statements of financial position of STX Offshore & Shipbuilding Co., Ltd. (the Company ) as of December 31, 2012 and 2011, and the related separate statements of comprehensive income (loss), changes in equity and cash flows for the years then ended. Management is responsible for the preparation and fair presentation of these separate financial statements in accordance with Korean International Financial Reporting Standards. Our responsibility is to express an opinion on these separate financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the Republic of Korea. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the separate financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the separate financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. In our opinion, the separate financial statements referred to above present fairly, in all material respects, the separate financial position of the Company as of December 31, 2012 and 2011 and its financial performance and its cash flows for the years then ended, in accordance with Korean International Financial Reporting Standards. Without qualifying our opinion, we draw attention to the following: As described in note 29, the Company has sales and purchase transactions with related parties such as STX Corporation and the amount of related balances due to or from related parties is recorded as of December 31, 2012 and In addition, the Company provides payment guarantees to Korea Development Bank and other banks for borrowings of the related parties such as STX (Dalian) Shipbuilding Co., Ltd. and advances from customers. As described in note 31 to the financial statements, in 2012, STX Group including the Company had entered into a financial structure improvement agreement with its main creditor bank, Korea Development Bank. Non-consolidated Statements of Financial Position As of December 31, 2012 and 2011 (In millions of won) Assets Cash and cash equivalents 51, ,443 Other financial assets 49,000 64,012 Available-for-sale financial assets 17 - Trade receivables 38,595 40,358 Due from customers for contract work 1,028,140 1,162,705 Advance payments 454, ,943 Prepaid expenses 84, ,504 Short-term loans 178,244 1,167 Other receivables 191, ,153 Inventories 184, ,944 Financial derivative assets 31,549 6,540 Firm commitment assets - 56,236 Assets held for sale 69,845 - Total current assets 2,361,783 2,245,005 Other financial assets 8 8 Available-for-sale financial assets 87, ,747 Other investments Investments in associates 182, ,239 Investments in subsidiaries 964, ,118 Long-term trade receivables 53,369 34,949 Long-term loans 769,785 1,069,363 Other receivables 8,071 18,442 Property, plant and equipment 1,486,173 1,489,566 Intangible assets 17,687 14,879 Financial derivative assets 28, Firm commitment assets - 25,449 Total non-current assets 3,597,443 3,984,208 Total assets 5,959,226 6,229,213 KPMG Samjong Accounting Corp. Seoul, Korea March 20, 2013 This report is effective as of March 20, 2013, the audit report date. Certain subsequent events or circumstances, which may occur between the audit report date and the time of reading this report, could have a material impact on the accompanying separate financial statements and notes thereto. Accordingly, the readers of the audit report should understand that the above audit report has not been updated to reflect the impact of such subsequent events or circumstances, if any.

18 34 RESHAPING ANNUAL REPORT Financial Section Non-consolidated Statements of Financial Position As of December 31, 2012 and 2011 (In millions of won) Liabilities Short-term borrowings 1,123, ,346 Current portion of long-term borrowings - 20,000 Short-term bonds 349, ,000 Current portion of long-term bonds 444, ,930 Bond with stock purchase warrants 98, ,326 Financial guarantee liabilities 3,638 5,889 Trade payables 761, ,038 Other payables 214, ,861 Accrued expense 172, ,932 Other current liabilities 17,165 18,792 Income tax payables - 12,741 Advances from customers 55, ,004 Due to customers for contract work 974, ,307 Financial derivative liabilities 7, ,951 Firm commitment liabilities 63,008 31,498 Total current liabilities 4,285,780 3,554,615 Bonds 199, ,574 Bond with stock purchase warrants 149,327 97,059 Long-term borrowings 83,800 44,000 Provisions 23,549 19,027 Defined benefit liabilities 10,727 9,379 Financial derivative liabilities ,503 Firm commitment liabilities 21, Deferred tax liabilities 69, ,900 Total non-current liabilities 558, ,841 Non-consolidated Statements of Comprehensive Income For the years ended December 31, 2012 and 2011 (In millions of won, except earnings (loss) per share information) Sales 3,399,290 4,269,210 Cost of sales (3,711,035) (4,086,033) Gross profit (loss) (311,745) 183,177 Selling, general and administrative expenses (88,453) (78,214) Profit (Loss) from operations (400,198) 104,963 Other income 4,791 2,181 Other expenses (360,511) (2,648) Finance income 587, ,970 Finance costs (600,224) (775,681) Profit (Loss) before income tax (769,025) 17,785 Income tax benefit (expense) 137,405 (37,485) Profit (Loss) for the year (631,620) (19,700) Other comprehensive income (loss), net of tax Net change in fair value of available-for-sale financial assets 6,023 (6,033) Defined benefit plan actuarial gain (loss) (1,845) 3,870 Gains on revaluations of property, plant and equipment - 11,382 Total other comprehensive income for the year, net of tax 4,178 9,219 Total comprehensive income (loss) for the year (627,442) (10,481) Earnings (Loss) per share Basic loss per share (7,467) (251) Diluted loss per share (7,498) (251) Total liabilities 4,843,923 4,521,456 Equity Share capital 214, ,075 Capital surplus 312, ,219 Treasury shares (6,736) (6,736) Other equity 112, ,615 Retained earnings 482,880 1,133,584 Total equity 1,115,303 1,707,757 Total liabilities and equity 5,959,226 6,229,213

19 36 RESHAPING ANNUAL REPORT Financial Section Non-consolidated Statements of Changes in Equity (In millions of won) Share capital Capital surplus Treasury shares Other equity Retained earnings Total equity Balance at January 1, , ,308 (6,736) 105,265 1,166,063 1,698,001 Total comprehensive loss for the period Loss for the year (19,700) (19,700) Net change in fair value of available-for-sale financial assets (6,033) - (6,033) Actuarial gains ,870 3,870 Revaluation surplus ,382-11,382 Total comprehensive loss for the period ,349 (15,830) (10,481) Transactions with owners, recorded directly in equity Dividends paid (15,136) (15,136) Stock warrants exercised 6,974 34, ,156 Issuance of stock warrants Share-based payment transactions (6,512) - (6,512) Transfer to legal reserve ,513 (1,513) - Total transactions with owners recorde directly in equity 6,974 34,911 - (4,999) (16,649) 20,237 Balance at December 31, , ,219 (6,736) 105,615 1,133,584 1,707,757 Balance at January 1, , ,219 (6,736) 105,615 1,133,584 1,707,757 Total comprehensive loss for the period Loss for the year (631,620) (631,620) Net change in fair value of available-for-sale financial assets ,023-6,023 Actuarial losses (1,845) (1,845) Revaluation surplus (24) 24 - Total comprehensive loss for the period ,999 (633,441) (627,442) Transactions with owners, recorded directly in equity Dividends paid (15,694) (15,694) Stock warrants exercised 15,290 34, ,016 Issuance of stock warrants - 1, ,337 Share-based payment transactions (671) - (671) Transfer to legal reserve ,569 (1,569) - Total transactions with owners recorded directly in equity For the years ended December 31, 2012 and ,290 36, (17,263) 34,988 Balance at December 31, , ,282 (6,736) 112, ,880 1,115,303 Non-consolidated Statements of Cash Flows For the years ended December 31, 2012 and 2011 (In millions of won) Cash flows from operating activities Cash used in operating activities (174,215) (129,022) Interest received 55, ,303 Dividends received 13,071 9,294 Income tax paid (43,154) (13,095) Cash provided by (used in) operating activities (148,878) 25,480 Cash flows from investing activities Decrease in other financial assets 15,012 - Proceeds from sale of available-for-sale financial assets 35,451 14,950 Proceeds from sale of investments in associates 120,965 - Collection of loans 5, ,607 Proceeds from sale of property, plant and equipment 6,714 1,915 Proceeds from sale of intangible assets Decrease in other investments Increase in other financial assets - (18,512) Purchase of available-for-sale financial assets (11,540) (2,378) Purchase of investments in subsidiaries (146,039) (147,550) Increase in loans (34,381) (67,463) Purchase of property, plant and equipment (123,117) (135,306) Purchase of intangible assets (764) (2,328) Purchase of other investments - (5) Net cash used in investing activities (131,266) (94,634) Cash flows from financing activities Proceeds from short-term borrowings 2,544,161 1,938,432 Proceeds from long-term borrowings 39,800 64,000 Proceeds from issuance of bonds 748, ,694 Proceeds from issuance of bonds with stock purchase warrants 195,789 97,746 Proceeds from issuance of shares for warrants exercised 2,967 36,625 Repayments of short-term borrowings (2,155,769) (2,311,752) Repayments of current portion of long-term borrowings (20,000) (10,000) Repayments of bonds (845,000) (555,000) Repayments of bond with stock purchase warrants (169,125) (23,207) Interest paid (130,247) (121,179) Dividends paid (15,694) (15,136) Net cash provided by (used in) financing activities 195,596 (10,777) Net decrease in cash and cash equivalents (84,548) (79,931) Cash and cash equivalents at beginning of year 136, ,742 Effect of exchange rate fluctuations on cash held (557) (368) Cash and cash equivalents at end of year 51, ,443

20 38 RESHAPING ANNUAL REPORT Affiliates Affiliates STX PanOcean Co., Ltd. com As Korea s representative shipping company, STX Pan Ocean has been gaining high reputation and trust in the dry bulk shipping markets in the world for a long time. Based on unrivaled competitiveness in the dry bulk service, the company has extended its reach to non-dry bulk sectors such as container service, tanker service, car carrier service, gas carrier service and OSV (Offshore Support Vessel) service. Furthermore, it made the nation s first foray into the semi-submersible vessel and heavy lift carrier services. To secure the foundation for sustainable growth and stable business portfolio, the company pursued business diversification by entering the grain terminal and marine specialized vessel businesses for the first time in Korea. By harnessing continuous marketing activities based on its solid global network and accumulated experience in shipping services, it has been succeeding in signing a series of long-term contracts with major domestic and foreign shippers, and laying the foundation for mid and long-term growth. STX Pan Ocean is currently emerging as the world s best shipping company through continuously expanding the fleet and developing new businesses. STX Dalian Shipyards To leapfrog into a global leading shipbuilder, STX Group completed the integrated shipbuilding and machinery production system in Dalian, China, through close cooperation among affiliates. STX Dalian Shipbuilding Complex, as the center of STX s global network connecting Korea, Europe and China, plays a pivotal role for STX Group s advance into the world s best shipbuilding group and global engine maker. STX Dalian Shipbuilding Complex, equipped with the world s largest dry dock, a 5 km long quay, and a steel cutting facility with an annual capacity of 1 million tons, has established a production system for various industrial plants as well as a specialized and vertical integration system for basic material processing, engine assembling, hull block fabrication, shipbuilding and offshore construction. Dalian Shipbuilding Complex will play a key role in realizing STX s dream to become a global top shipbuilder & engine maker. STX Heavy Industries Co., Ltd. co.kr STX Heavy Industries was founded as STX Enpaco in 2001, renamed as STX Metal in 2010, and merged with former STX Heavy Industries in January Instead of remaining as a manufacturer of shipbuilding & machinery modules and large diesel engines, it chose to reemerge as a global company by entering the industrial plant EPC business that requires combined state-of-the art technologies. STX Heavy Industries is creating new opportunities in the global market by winning a series of new projects in the power generation and chemical plant industry centered on the Middle East and South America, thanks to the successful implementation of projects to construct steel plants in Saudi Arabia and diesel power plants in Iraq. Moreover, based on 35-year accumulated technologies and know-how in engines and materials, its products, including superchargers and crankshafts for mid-sized diesel engines and cylinder liners for large-sized diesel engines, are selected as the world s best products, while its technologies are highly recognized in the domestic and overseas markets owing to the production of key components in diesel engines, shipbuilding equipment, and state-of-the-art materials. STX Energy Co., Ltd. STX Energy has cogeneration power plants in Banwol Industrial Complex and Gumi Industrial Complex, providing high-quality steam and electricity to customers in the industrial complexes. The cogeneration power plants have raised energy efficiency by more than 30% through advanced operating system and innovatively reduced costs through fuel diversification. Moreover, the company has acquired the rights to operate the community energy business for Daegu Technopolis, and is promoting its district heating business, while striving to establish a platform as a comprehensive energy company. Along with the consolidation of oil trading business, STX Energy will focus on developing new business items such as trading and bio-diesel based on the existing network, and securing new growth engines for new and renewable energy business so as to emerge as a leading company that ushers in the green growth era. STX Construction Co., Ltd. co.kr Since the inception in 2005, STX Construction has been achieving remarkable growth by building megascale port facilities, goliath cranes and plants. Its main growth engine lies in aggressive entry into overseas businesses. Starting with the STX Dalian Shipbuilding Complex project, STX Construction has been engaged in constructing new towns for approximately 30 thousand households in surrounding areas, and preparing for the construction of ports and shipyards in Russia and Brazil. Moreover, the earlier-than-scheduled completion of the ultra large residential complex project totaling USD 180 million in Abu Dhabi, UAE, has brought the company the opportunity to win more projects: constructing the Rawdhat residential building in Abu Dhabi, and residential complexes in Saudi Arabia. STX Construction s overseas business has been more spurred by winning construction projects such as housing for working class in Guam, steel plants and residential complexes in Saudi Arabia, and diesel power plants in Iraq. STX Solar Co., Ltd. Starting with the solar cell business, STX Solar has provided a total solution for the solar industry. The company established a solar cell factory and a R&D center at the site of 60,000 m² in the 4th Gumi National Industrial Complex in 2009, and increased the production capacity of solar cells to 180MW while building a 50MW solar cell module factory in Furthermore, its comprehensive EPC capability covering power plant design and production, installation, and test-run has been reinforced. STX Solar has established total solution systems in the solar business sector by cooperating with affiliates experienced in power plant development and operation, such as STX Energy, and completed the vertical integration system for solar cell < module< system installation. In order to effectively comply with the Renewable Portfolio Standard (RPS) that will take effect from 2012, STX Solar will focus on the system installation business at home and abroad and expand the production scale of solar cells to 500MW and modules to 200MW so that it can meet the huge demand to be created through the grid parity from STX Offshore & Shipbuilding Co., Ltd. Based on 45-year accumulated experiences, cuttingedge technologies and top-notch workforce, STX Offshore & Shipbuilding is demonstrating its global competitiveness in designing and building high value-added vessels such as LNG carriers, ultra-large containerships and VLCCs. In addition, it successfully entered the offshore business, gaining recognition as the world s leading shipbuilder in the fields of offshore facilities such as offshore pipe layer, drillship and floating storage unit and special purposed vessels such as dredger and side stone dumping vessel. As the only global shipbuilder capable of constructing all types of ships based on three footholds connecting Dalian Shipbuilding Complex, STX Europe, and Jinhae shipyard, the company will usher in the future of ocean industry through continuous technology innovation and business structure advancement. STX Europe ASA Based on original technologies accumulated for more than 270 years, STX Europe has been specialized in building high value-added ships such as cruise ships, ferries, merchant ships, and offshore plants. The company is operating 15 shipyards in 6 countries, and committed to maximizing customer satisfaction by building and supplying innovative ships that meet the needs of customers around the world. While building cruise ships and ferries mainly at the shipyards in Finland and France, we provide major cruise ship owners with quality ship maintenance services. STX Europe has constructed the top 15 cruise ships in terms of size, including the world s largest cruise ships Oasis of the Seas and Allure of the Seas, and demonstrates its unrivaled excellence in the industry based on top-notch technical professionals, modernized shipyards, second-to-none ship design technologies and abundant shipbuilding experiences. STX Engine Co., Ltd. STX Engine is specialized in diesel engine production ranging from marine engines for mega-scale containerships, LNG carriers, ultra-large oil tankers, drill ships and FPSO, military engines with high power output and ultra-lightness, generator engines, to engines for other industrial applications. Its independent technologies, such as cutting-edge military equipment and navigation data storage device VDR, have earned the company with high reputation in the global telecommunication industry. Through continuous technology development, the successfully localized four-stroke diesel engine has achieved a cumulative production of 30 million hp, while the marine generator engine was selected as the World s Best Product. Moreover, with the development of a four-stroke common rail diesel engine for marine use, which lowers nitrogen oxide emissions by 22%, STX Engine is demonstrating leadership in the eco-friendly engine development field. STX Engine also made inroads into the ship automation business through partnerships with leading international companies, and more recently has implemented the power plant project in Iraq. STX Electric Power Co., Ltd. According to the government s 5th Basic Plan for Electricity Supply and Demand, STX Electric Power is pushing ahead with the construction of Bukpyeong Power Plant, the nations first base load thermal power plant in public-private partnership, in Donghae City, Gangwon Province. With two power facilities with a generation capacity of 500 MW each or 1,190 MW in total to be completed by 2015, Bukpyeong Power Plant will be the most advanced eco-friendly power plant in Korea. Upon the successful completion, STX Electric Power is ready to take off as the country s representative private power generator. The advancement into the private power generation business has also created synergy in all business sectors of the Group including construction, overseas resource development, trading, shipbuilding, and solar and wind power businesses. STX Electric Power will diversify its business portfolio based on the Group s capabilities, and leapfrog into the nation s leading power generator. STX Marine Service Co., Ltd. STX Marine Service was spun off from STX Corporation to strengthen expertise and core capability in the marine service business in The company has provided customers with systematic marine services that meet their needs and tightening ship-related regulations while improving service quality through effective safety, quality, and environment management. Its business portfolio includes comprehensive marine services such as sale of materials and products for ships, commissioning of vessel engines, repairmen services, and sale of ship parts. STX Marine Service intends to become a world-class total marine service provider. To this end, the company is concentrating on securing specialized technologies and high-caliber talents, and expanding the global network.