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(LEAD) ESS makers take a hit from delayed probe into fires

All Headlines 11:00 May 02, 2019

(ATTN: ADDS details in paras 2-3, last 2 paras)

SEOUL, May 2 (Yonhap) -- South Korea's energy storage system (ESS) producers have been hit hard by a delay in determining the cause of a series of ESS fires, industry sources said Thursday.

A civilian-government committee has been carrying out an investigation into a series of fires that broke out in ESS equipment from local producers including Samsung SDI Co. and LG Chem Ltd. The 21 accidents occurred from August 2017 through January this year.

While the committee had originally planned to unveil the outcome by late March, the Ministry of Trade, Industry and Energy said the announcement will be delayed to early June, citing complications in finding out the main cause of the fires scientifically.

The ESS refers to the procedures of saving energy in a large-scale battery for efficient distribution of power. For example, an ESS can save energy during night hours to be utilized during daytime, when demand for power is high.

The delayed announcement has made a big dent in the bottom lines of local ESS makers as they failed to win new orders. The government has called on companies to suspend ESS operations until the outcome is released, bringing domestic sales to a virtual halt.

Samsung SDI, the battery-making unit of Samsung Electronics Co., said Tuesday that its operating income tumbled 52.2 percent on-quarter to 130 billion won (US$112 million) in the first quarter of the year due to poor ESS business.

This undated file photo shows firefighters putting out an ESS fire. (Yonhap)

LG Chem, South Korea's top chemicals and battery maker, also said last week its first-quarter net profit plunged 62 percent to 211 billion won due to the one-off cost of covering fire damage to its ESS equipment.

In particular, LG Chem's battery business lost a lot of money as the company was forced to set aside an estimated 120 billion won to cover the fire damage.

LSIS Co., formerly LS Industrial Systems Co., saw its operating profit nose-dive 48.3 percent on-year to 28.7 billion won in the January-March period, due mainly to tumbling ESS demand.

Hyosung Heavy Industries Co., which chalked up a tenfold on-year rise in sales during the first half of last year, is reported to have furloughed workers in the wake of the ESS fire scare.

Industry watchers said the delayed announcement of the fire probe results have hit smaller ESS manufacturers harder though official data are unavailable.

Local ESS makers are widely feared to continue to take a hit from the postponed announcement down the road.

Despite its promise to make the cause of the fires public by early-June, some analysts said the committee's announcement may be postponed further.

"It is not desirable for the ESS sector to remain in a coma for a long period, though determining the cause of the fires is indispensable because the public's safety should be put before anything else," an industry source said.

The ministry said it is currently looking into various possibilities behind the fires, including the malfunction of equipment due to electric shock or problems in the design and operation of ESS products.

The ministry said it will complete the investigation as soon as possible, and a set of support measures for the ESS industry will be announced as well.
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