Doosan Enerbility has joined hands with U.S. engineering and construction firm McDermott to target the global power generation market, including artificial intelligence (AI) data centers. The two companies plan to jointly review projects that include gas turbines, generators, and related equipment and services.

MOU Signed... 'Behind the Meter' Power Generation Method is Key

According to McDermott's official announcement on the 4th (local time), Doosan Enerbility and McDermott signed a memorandum of understanding (MOU) to identify strategic cooperation opportunities in the power generation market.

The scope of cooperation includes the 'Behind the Meter' power generation method, which directly supplies electricity to AI data centers. This approach involves building power generation facilities near data centers to bypass the public grid or reduce reliance on it. As grid connection delays and large-scale power shortages emerge as constraints on data center construction, on-site power generation facilities are emerging as a new market.

McDermott explained that through this agreement, the two companies will explore new business approaches that improve project execution efficiency and reduce response times and business risks. However, the announcement is at the MOU stage rather than a binding supply agreement or order, so specific project sizes and contract values have not been disclosed.

Strong Q2 Performance... Enerbility Order Backlog Exceeds 26 Trillion Won

According to a report by EDaily citing the company's announcement, Doosan Enerbility's consolidated revenue for the second quarter of this year was 4.7248 trillion won, a 3% increase year-over-year. Operating profit rose 16% to 314.26 billion won, net income reached 226.4 billion won (a 14% increase), and net income attributable to controlling interests stood at 157.6 billion won (a 20% increase).

The Enerbility division's order backlog stood at 26.3509 trillion won as of the end of the first half, an increase of approximately 2.1 trillion won from the previous quarter. The company is pursuing a target of 13.3 trillion won in new orders this year, centered on major projects such as the Czech nuclear power plant and gas turbines.

SMR Business Also a Candidate for Order Expansion... Cooperation with Rolls-Royce Underway

The SMR (Small Modular Reactor) business is also cited as a key candidate to drive order expansion. According to an official Doosan Group announcement, Doosan Enerbility was selected in May as a major equipment manufacturing partner for the UK and Czech projects being developed by Rolls-Royce SMR. The company is reviewing the manufacturability of core equipment, including reactor vessels, and is also pursuing plans to build a dedicated SMR manufacturing facility at its Changwon headquarters.

However, in the Rolls-Royce SMR project, demands to expand the domestic supply chain within the UK have emerged as a variable. The Financial Times reported that some in British politics and the manufacturing sector have called for increasing the proportion of domestic procurement regarding the participation of overseas companies, including Doosan Enerbility, in key components. This does not mean that Doosan Enerbility will be immediately excluded from the supply chain; rather, it indicates the possibility of future adjustments surrounding order volumes and local production proportions. Doosan Enerbility has already been officially selected as a major equipment manufacturing partner by Rolls-Royce SMR.

Therefore, at this stage, rather than concluding that the cooperation has fallen through, it is necessary to monitor how the UK's local procurement demands will affect Doosan Enerbility's manufacturing scope and contract size.

Future Key Factor: Speed of Converting Order Backlog into Revenue

The key to future performance lies in the speed at which the 26-trillion-won order backlog is converted into revenue. Large-scale nuclear power, SMR, and gas turbine projects require considerable time from contract signing to equipment manufacturing and revenue recognition. Even if new orders increase, raw material procurement, production facility expansion, and working capital investments may occur first, making it difficult to conclude that operating profit and cash flow will improve at the same pace.

The AI data center power business being pursued with McDermott also still needs to transition from an MOU to an actual gas turbine supply agreement. Whether future details such as the generation capacity, number of units supplied, contract value, and construction and delivery schedules for individual projects are disclosed will likely be a key point to watch.

Doosan Enerbility is expanding its business scope beyond nuclear power and SMRs to include gas turbine-based power supply for data centers. However, to prove with actual results the growth expectations already reflected in its current corporate value, improvements in the operating profit margin of the Enerbility division and the conversion of major projects into definitive contracts will likely need to occur simultaneously.

[This article is for reference purposes for investment decisions and does not recommend the purchase or sale of any specific stock. The responsibility for stock investments lies with the investor. This article was written with AI assistance.]