CLEAN ENERGY Green Tomorrow We Are Committed to Sharing Happiness with People and Society
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CLEAN ENERGY green tomorrow We are Committed to Sharing Happiness With People and Society > > > 04 CEO’s Message 23 Corporate Social Responsibility 06 Vision & History 24 Social Contribution 07 LNG Strategy 26 Ethics Management 08 Corporate Governance 27 Human Resource Management 11 Review of Operations 28 Environment Management 12 City Gas & CNG 30 Financial Review 14 Power Business 16 District Energy Business 18 LNG Business 20 Global Business Since the inception in 1999, SK E&S has evolved into Korea’s leading comprehensive energy service provider engaging in the city gas, power generation, district heating & cooling and LNG businesses. Today, we have seven city gas companies, two subsidiaries in district heating & cooling business, power generation and LNG trading businesses, and two joint city gas ventures in the world. Through our subsidiaries, we are making endeavors to develop new growth engines in sectors such as power generation, district heating & cooling and LNG while maximizing the value of the city gas business. Our focuses are also on laying the foundation for emerging as a comprehensive energy service provider in the global market. The entrance into the Chinese city gas market in 2007 was the first step to realize this business goal, and followed by the expansion of reach to other global energy markets such as the US. SK E&S will be committed to creating new value through clean and environment-friendly energy businesses with the aim of sharing happiness with all people. CEO’S MessAGE Our progress has been remarkable in diverse business sectors such as city gas, power generation and district heating & cooling until now. Based on these performances, we will establish a foothold to grow into a world-class company by expanding the value chain in the LNG business, which will bring our vision to be the “Global Gas & Power Company” forward. Our valued customers and shareholders! SK E&S has solidified its growth foundation as a top-tier Global Gas & Power Company through the implementation of LNG value chain expansion strategies earlier than expected last year as well as the achievement of financial goals. In the downstream sector, we consolidated fundamental competitiveness of the power and city gas business through the merger of K-Power and the acquisition of exclusive managerial right of KO-ONE Energy Service. Also, shortening the construction period of Oseong LNG Power Plant and Gimcheon District Heating & Cooling projects, and acquiring the business rights of Jangmun Combined Power Generation and Munjeong District Heating & Cooling projects allowed us to secure additional future growth engines. In the mid & upstream sector, the Company laid the foundation for entering the independent LNG terminal operation and upstream businesses with the launch of the LNG business division within SK E&S. We also established SK LNG Trading, a local subsidiary in Singapore to enhance our competency of the direct LNG import business. In the perspective of management infrastructure, we successfully unified five core business processes of city gas business, improved the HR and IT systems, and integrated the knowledge management system, which enabled us to concentrate of company-wide capabilities and promote a One-Company environment. SK E&S will carry out the following core tasks for 2012 to become a global company by laying the growth foundation centered on gas & power businesses. First, we will focus on securing operational excellence in the city gas and power businesses. Above all, our top priorities lie in maintaining market dominance and creating Vice Chairman & CEO Chey Jae Won new demands in our flagship city gas business as well as maximizing the operational efficiency of Gwangyang LNG Power Plant. We will also continue to make significant progress by concentrating capabilities of all subsidiaries including Ko-one Energy Service in the city gas business. CLEAN ENERGY GREEN TOMORRow 4 Second, we will establish advanced business portfolio as a global gas & power company. It is very important for us to increase LNG demands and secure upstream options to meet growing demands through the expansion of city gas, power and district energy businesses. When each business organization organically cooperates and develops based on the LNG demand and supply master plan, we can leap forward as a true global gas & power company we have dreamed of. Beyond the acceleration of our businesses in the global markets including China and technology-driven business, we will continue to focus on creating synergy and sharing resources with Group affiliates to further expand our reach. Third, business capabilities will be enhanced. The required business capabilities should be procured and circulated internally. SK E&S conducts systematic job education and training programs to strengthen core business capabilities. Meanwhile, capabilities for specialized business sectors which are difficult to procure internally will be searched and secured by each business division, and the staff in all business departments will proactively support such efforts. Fourth, our innovation respecting human and culture will be accelerated based on bottom-up corporate culture. All employees of SK E&S are key players for our innovation, growth, and cultural development. For greater happiness for all, unnecessary rules should be done away with by using a bottom-up mode through members’ voluntary participation; the work modes, processes, and systems need to be changed as well. In this context, the SKMS guidelines should be actively used as tools for open communication between hierarchies; the ability to put human/culture innovation into practice should also be enhanced. My dearest customers and shareholders, One person’s dream may remain just a dream; when all of us dream of the same dream, however, it can come true. SK E&S will push forward to achieve President & CEO Duk Kyu Moon the second to-be model goal of laying the gas & power-centered growth foundation by consolidating all our competencies. I wish all the best for you and your families in 2012. Thank you for your unwavering interest and support. 5 SK E&S CORPORATE VISION SK E&S, a comprehensive energy service provider, is preparing a new leap forward beyond the No.1 player in the domestic city gas industry. We set a goal to emerge as the “Global Gas & Power Company” by 2020 in the global energy market, which is being executed by systematic strategies on the basis of accumulated capabilities and expertise. SK E&S will emerge as a truly global energy player by maximizing its strengths in the gas and electric power sectors such as expanding the value chain in the LNG business, enhancing capability in the power and district heating & cooling business and accelerating overseas business as well as improving the value in the city gas business. • Expansion of Value Chain in LNG Business • Expansion of District Heating & Cooling Business • Involvement in the Global Energy Business Leapfrog into Global Gas & Power Company by Expanding Energy Businesses • Reinforcement of Capability in • Enhancement of the Value of Power Generation City Gas Business HIstoRY Since the establishment in 1999, SK E&S has played an important role in the development of the domestic energy industry through its city gas and power businesses. Today, the company is evolving into Korea’s leading comprehensive energy provider that operates district heating & cooling, power generation and LNG businesses. Jan. 13 Founded SK-Enron Corp., a joint venture between SK Corp. and Enron Corp. (Subsidiaries: SK Gas, Daehan City Gas, Pusan City Gas, Kumi City Gas, Chongju City Gas, and Pohang City Gas) May Oct. 5 Managed the Process Standardization Project Feb. 8 Changed major shareholder from Enron including billing, finance & accounting and Acquired Choongnam to Macquarie, an Australian investment procurement City Gas bank Dec. 14 May. 20 Oct. 28 Nov. 21 Acquired Chonnam City Gas, Kangwon City Gas, Iksan Converted to a holding Changed the company name to SK E&S Merged Iksan City Gas with Iksan City Gas, and Iksan Energy company system Co., Ltd. Energy 1999 2000 2005 2006 CLEAN ENERGY GREEN TOMORRow 6 LNG STRATEGY The SK Group is going ahead with the value chain integration in the LNG business after the success of the vertical integration of the petroleum business. The leader in the move is SK E&S growing into a global gas & power player. We will take the lead in integrating all value chains in the LNG sector by promoting LNG-based related businesses and reinforcing global competitiveness. By doing so, we will continue to create synergy effects and consequently leapfrog into a global utility company. Power Generation Global / City Gas / District Technology- Heating & based Cooling - Expansion of business domain into LNG-based related sectors - Enhancement of synergy effect among business portfolios Laying the foundation for expanding LNG value chain through participating in midstream and upstream sectors Global Gas & Power Company Feb Jan Mar. 15 Opened SK E&S Beijing Representative Established Gimcheon Agreed upon a contract to established office District Heating & Cooling a joint venture named ‘China Gas-SK May Joint Venture and started Energy Holdings Co., Ltd.’ with China Gas Established a joint venture named construction Holdings ‘Jinhua Zhongran-SK City Gas Feb. 17 Aug. 1 Development Company’ in China Established SK LNG Trading Changed the subsidiary name from Kumi Established DOP Service Co., Ltd. to PTE.,ltd. in Singapore City Gas to ‘Yeongnam Energy Service’