Boston, MA -- (SBWIRE) -- 05/24/2013 -- We believe that construction activity in South Korea could pick-up in 2013 even though the lack of construction growth in recent quarters (particularly for infrastructure) has dampened our outlook for the construction sector. This pick-up is due to improving monetary conditions for construction activity, the government's plans to improve the country's infrastructure (particularly electricity supply), growing demand for tourism-related facilities and to a lesser extent, housing stimulus measures. As such, we are maintaining our forecasts for construction real growth at 2.7% in 2013, an improvement from the -1.6% seen in 2012.

Key growth drivers over the previous quarter:

- In March 2013, officials from the Ministry of Land, Transport and Maritime Affairs said that the government had decided to establish a second public firm to operate the country's KTX high-speed trains, most likely the Honam line. It is hoped that with greater competition, service quality and safety standards in South Korea's rail network would be improved. At present, South Korea's railway system is solely managed by the state-owned operator Korea Railroad (Korail).
- In January 2013, a report from the South Korean Board of Audit and Inspection stated that the Four Major Rivers Restoration project, is riddled with flaws and would require a fortune to maintain. The KRW22.2trn (US$20.1bn) project involved the construction of 16 weirs and dams along four rivers in South Korea and was completed in 2011. Faulty designs have led to the lack of sturdiness in 11 of the 16 dams, fear of deteriorating water quality and the requirement of excessive maintenance costs.
- In early 2013, the South Korean government released its 6th Electricity Supply & Demand Plan. Under the new 15-year plan, 18 thermal power plants - 12 coal-fired and six liquefied natural gas (LNG)-fired - with a combined capacity of 15,800MW would be completed by 2027. This focus on thermal generation is creating numerous opportunities for domestic companies. Of the 12 coal-fired power plants, eight of them with a total capacity of 8,000MW would be build by Samsung and three other private companies - namely Tongyang Power, SK E&C and a subsidiary of Dongbu Group. The plants are expected to be completed between 2018 and 2027, and are the first coal plants that the government has awarded to private operators in the previous three decades. The remaining four coal-fired power plants with a combined capacity of 2740MW are expected to be developed by state operators. As for the six LNG-fired power plants, they are expected to have a combined capacity of 5,060MW and to be constructed by a combination of state and private companies, which include SK E&C and Daewoo E&C. The LNG plants are scheduled to start commercial operation from 2015 to 2017.

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