South Korea’s Hanjin Heavy Industries & Construction Co. grappling with debts has decided to defer the sale of its three power and energy subsidiaries on growing expectations for turnaround in the third quarter following the successful selloffs of other non-core assets.

According to multiple sources from the investment bank industry on Tuesday, Hanjin Heavy Industries is considering submitting a proposal to creditors including Korea Development Bank next month that includes the plan of holding off the sale of its three power and energy units - Daeryun E&S Co., Daeryun Power Co. and Byeollae Energy Co. The plan requires creditors’ review and approval once it is submitted.

Hanjin Heavy Industries’ move comes amid growing expectations for the country’s LNG industry after the new government announced its plan to shift away coal-fired power plants to tackle high levels of fine dust engulfing the nation to eco-friendly fuel like LNG. Daeryun E&C, a city gas provider, has been showing solid performance, but Daeryun Power and Byeollae Energy that have been in the red due to massive financial expenses. However, Daeryun Power and Byeollae Energy, electric energy generators using LNG whose combined capacity of power generation ranks third in the county, are expected to become the shipbuilder’s cash cow units in the longer term.

Hanjin Heavy Industries put its energy units out on the market to repay maturing debts, but it would be able to reduce debts by selling other assets instead of those energy units, an unnamed official from the investment bank industry said.

Hanjin Heavy Industries, in fact, has been successful in streamlining its business. It has been focusing on lowering its debt ratio and bolstering operating profit by selling non-core assets. The company has sold 300 billion won ($266.7 million) worth assets from January to July.

Sources noted that Incheon North Port sites that Hanjin Heavy Industries had received from ship owners for building ships are classified as operating assets and their sales are reflected in the company’s income statement.

Yang Hyung-mo, analyst at eBest Investment & Securities Co., expected Hanjin Heavy Industries is expected to report solid earnings in the third quarter ended September thanks to the successful sale of its real estate assets. The company’s operating profit is projected to further increase in the October-December period if it succeeds in the sale of remaining assets, he added.

According to Seoul-based data provider FnGuide, Hanjin Heavy Industries is estimated to have raked in 50.2 billion won in operating income in the July-September period, swinging to profits from an operating loss of 2.8 billion won in the same period last year. The company is expected to earn 68.8 billion won in operating income in the fourth quarter and even higher depending on the sale of its other assets.

Recently, Hanjin Heavy Industries picked the employee stock ownership association of Korea Engineering Consultants Corp. as the preferred bidder for the construction services company. It is also expected to speed up the disposal of its in-flight catering company Hacor Inc. It already sent investment letters to potential buyers. The sale of the two units is expected to help Hanjin Heavy Industries raise more than 100 billion won in funds.

By Moon Il-ho and Chun Gyung-woon

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