◇ Synergies Created through Acquisitions and the Growth Strategy of the Merged

    Business Were Promoted among Analysts on the 30th

- Detailed Goals and Strategies for each Business to Achieve the Target Revenues of KRW 40 Trillion for

   2020 Introduced

◇ HR of Samsung Engineering Will Be Fully Utilized, and Offshore Plant Design

   Competencies Will Be Developed Further

- Discussion on SAIPEM, where Onshore Plant Design HR were successfully replaced with Offshore

   Plant Design HR within just Six Months

◇ Costs of KRW 100 Billion Annually Will Be Saved through Integrated Procurement after

   Acquisition

- Post-Acquisition Debt Ratio Comparable to Samsung Heavy Industries

CEO of Samsung Heavy Industries Dae-young Park, which will be merging with Samsung Engineering on December 1, 2014, expressed high expectations regarding the acquisition, saying “This acquisition will be a key to resolving the current challenges faced by our two companies, and will enable both companies to overcome the current crisis. This acquisition is critical for corporate growth.”

During the IR event targeting analysts of securities companies held on the 30th, CEO Park said “Our two companies have distinct sets of strengths and weaknesses, which are complementary. By being merged, the two companies will be able to rapidly overcome the current crisis and grow into a business with revenue of KRW 40 trillion by 2020.”

CEO Park also introduced specific goals and strategies for each business for achieving the target revenues of KRW 40 trillion by 2020, including shipbuilding revenues of KRW 6 trillion, marine drilling system revenues of KRW 4 trillion, offshore production system revenues of KRW 8 trillion, chemical engineering plant revenues of KRW 11 trillion, power generation system revenues of KRW 4 trillion and industrial environmental system revenues of KRW 2.5 trillion.

More notably, CEO Park said, “The area in which we can see the most benefit from the synergies created through the acquisition is marine production systems. The number of designers of Samsung Engineering that are capable of top-side detailed design of offshore plants amounts to about 1,000.”

He said, “It usually takes three to five years to develop new offshore plant designers, but we can see from the case of SAIPEM, in Italy, that it takes only six months to develop onshore plant designers into offshore plant designers.” He expressed his confidence that it will not take long to secure the competency in designing offshore plants, as there is about a 60% overlap between offshore plant and onshore plant technologies, and the overlap in technologies related to processes, mechanical systems and electronic control systems is about 90%.

CEO Park also said, “It is also a great synergy that Samsung Engineering can apply its expertise in the area of materials and equipment procurement for plant manufacturing to offshore plants, and that the two companies can develop competencies in procurement and delivery management by jointly managing major equipment and materials suppliers.”

He said, “We will be able to emerge in the mid to long term as the only full EPC service provider that can provide a total solution from design to manufacturing of large-sized offshore production systems.”

The merged company will have an annual procurement amount of about KRW 10.4 trillion. CEO Park stated that the merged company will be able to enjoy a significant cost saving effect through integrated purchasing. “The items for which we can immediately make integrated purchases are worth about KRW 1.1 trillion. Our review on items with potential cost saving effects predicted that the merged company will be able to save about KRW 100 billion a year through integrated procurement. If the integrated procurement amount increases to KRW 3 trillion in two or three years, the company will be able to save even more.”

He listed some of the benefits of the acquisition for Samsung Engineering, including advancement into the offshore plant market, and securing a foundation for entering the LNG liquefaction market.

Samsung Engineering will be able to gain experience in LNG liquefaction business operations by actively participating in FEED and detailed design verification of FLNG projects operated by Samsung Heavy Industries.

CEO Park also stated that the merged company will enjoy improved competitiveness in winning orders through the modularization of onshore plants, as the company can significantly reduce costs and improve construction management by manufacturing modules at shipyards and supplying the modules to clients in polar locations and remote locations with unfavorable construction conditions, as well as locations in North America with stringent local regulations.

CEO Park said, “We can modularize onshore plants by applying our world-leading production management competencies and utilizing the block plant in China or overseas shipyards in Southeast Asia, where we will be advancing into.”

He elaborated on the growth strategy of the existing businesses, saying “We will reinforce our product competitiveness, including in the area of eco ships and high efficiency power systems in the shipbuilding business, and secure new overseas bases and differentiated major items for each base, maximizing our revenues.”

He also touched on concerns over the debt ratio hike caused by the acquisition.

He said, “The accurate numbers will be available after the financial statements of the merged company are finalized on December 1, 2014, the date of the acquisition, but according to the financial statements of the two companies as of the end of June, 2-14, the debt ratio of the merged company will be 223%. This is similar to the debt ratio of Samsung Heavy Industries, which is 226%. Total liabilities will increase to KRW 17.8 trillion due to the acquisition, but total assets will also increase to KRW 8 trillion through the issuance of new shares.”