GnC Energy Co., South Korea’s largest supplier of emergency power generators, is enjoying a steady boost in business thanks to the burgeoning cloud service industry that requires constant power supply. The company’s outlook is also rosy as a number of global information technology firms including Microsoft Corp. are set to open cloud service-based data centers in the country.

Cloud service allows a user to store data on the Internet and retrieve and process them on demand in random devices via connection to the main server. Thus, it is important for cloud service providers to ensure their servers to constantly run and to be backed up with an emergency power generator to maintain smooth operation. According to multiple industry sources on Monday, GnC Energy has solidified its leading position in the country’s emergency power generator industry with a 70 percent market share. When only considering traditional emergency power generators for power plants, the company’s market share is 30 percent. But when taking account of power generators for the Internet data center (IDC), its market share jumps to 70 percent.

GnC Energy made a foray into the IDC industry in 2010 and its business in the sector has been growing ever since. Last year, the company was selected to supply emergency power generator facility for data centers set up by NH Nonghyup and KT Corp. Based on the growing demand, GnC Energy raised 24.6 billion won ($20.7 million) in sales last year solely from its emergency power facility business for data centers.

IDCs are widely known as the so-called “server hotel” where online servers for Internet connection are clustered in one facility. IDCs have gained much attention when Microsoft announced its plan to set up two data centers in Seoul and Busan early next year for its cloud service.

Ahn Byung-chul, president of GnC Energy, said that Korea is an attractive location for many global companies to base their data centers as it is safe from earthquakes and IT labor cost is relatively low compared to other advanced countries. He added that GnC Energy has won a contract last year to build an additional data center for one of the global firms.

Currently, the world’s big three cloud-service providers - Amazon.com, IBM Corporation and Microsoft - have secured data centers in Korea. Local companies including Samsung SDS Co., LG CNS Co. and SK Corp. also operate their own cloud service-focused data centers.

Ahn said that the most important factor companies consider when setting up data centers is “credibility” and that they are willing to pay high price if they are guaranteed high technical skills. He noted that when it comes to installing an emergency power generator, the capacity is 30 times more for an IDC compared to the capacity of an ordinary emergency power generator. Naturally, margin from IT-related emergency power generator sales is higher than other generators, granting more profit.

Boosted by the growing data industry that requires emergency power generating facility, Baek Joon-ki, a researcher at NH Investment & Securities Co., projected GnC Energy’s operating profit to reach 10.4 billion won this year, up 12.6 percent from the previous year. He also expected sales to increase 10.1 percent to 121.4 billion won over the same period. The company’s sales generated from the IDC sector, in particular, are projected to grow roughly 15 percent this year.

Meanwhile, the outlook for GnC Energy’s overall business is also bright based on overseas expansion. The share of its overseas sales increased from 3 percent to 15 percent last year when it won a 13 billion won worth contract to supply power generators for the Karbala Refinery Project in Iraq. The company has also supplied an emergency power generator to the business site of Samsung Electro-mechanics Co. in the Philippines in January, as well as one to the Samsung Display Co.’s Vietnam office.

Baek from NH Investment & Securities said that GnC Energy is most likely to win additional contracts in the Middle East and Southeast Asia based on the previous orders it won in Iraq and Vietnam. He also noted that the company’s bio-gas sector is raising steady profit despite the fall in the system marginal price (SMP) and renewable energy certificate (REC) price.

As part of efforts to boost next-generation growth engines, GnC Energy has been expanding investment in the bio-gas sector. It has plans to increase the number of bio-gas facilities from the current four to 10 by next year.

GnC Energy President Ahn noted that the company owns several bio-gas-related patents and that it has outstanding technology when it comes to bio-gas fermentation in the anaerobic digestion and production process.

By Kim Tae-joon

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