Hyundai Plans Ship Repair Yard at Subic Bay for Philippine Navy

Hyundai plans repair yard in Philippines
Department of National Defense for the Philippines leased the North Yard at Subic and would supply space to Hyundai for the repair yard (Philippines Department of National Defense)

Published Jun 29, 2022 3:43 PM by The Maritime Executive

Philippine officials are reporting that South Korean shipbuilder Hyundai Heavy Industries is planning to establish a repair facility at the former Subic Bay shipyard. The yard would be located on a portion of the yard formerly operated by another South Korean shipbuilding company, Hanjin Heavy Industries, and would be at least initially dedicated to the repair and maintenance of vessels Hyundai is building for the Armed Forces of the Philippines.

Secretary of the Department of National Defense for the Republic of the Philippines, Delfin Lorenzana, discussed the plans with reporters during his last meeting before retirement. "They are planning to construct a maintenance depot here for all HHI-ordered ships," Lorenzana said meeting with reporters on Tuesday. 

Development of the new ship repair yard would be the latest step in the Philippines’ effort to restart operations at the site which closed due to financial troubles more than three years ago. Hanjin had established a Philippine subsidiary, Hanjin Heavy Industries and Construction-Philippines, that was operating the yard but was hit hard by the downturn in international shipping in the mid-2010s. After struggling to find new work, they laid off as many as 7,000 workers in December 2018, and the following month, HHIC-Phil sought court receivership. The Korea Development Bank along with Filipino investors were reported to be the largest debtors in the collapse. As of 2021, HHIC-Phil had a total of $1.3 billion in outstanding loans, including $400 million due to Philippine banks and $900 million in loans from South Korean lenders.

After years of negotiations, the Philippines decided to split the facility into two operations, with the North Yard being converted into Naval Operating Base (NOB) Subic by the Department of National Defense. Opened last May, the facility is now a homeport for Philippine Navy ships. The North Yard spans around 100 hectares of the site's more than 280 hectares.

The activation of NOB Subic officials said is in line with the Navy's scaled-up maritime operations to support the needed base services of the deep-draft vessels, including those being built by Hyundai for the Philippines. The new base will house select fleet marine units, maintenance, and replenishment facilities that will enable the fleet to sustain the operational requirements of the current and future navy vessels. According to defense officials, NOB Subic is a vital component in the Navy's modernization effort toward becoming a multi-capable naval force.

Hyundai is the builder of the Philippine Navy's first two missile frigates, and in December 2021 was also awarded a contract for the two anti-submarine corvettes as well as an offshore patrol vessel. The South Korean yard previously completed one corvette, which is now in service with the Philippine Navy, and another one is expected to be delivered shortly to the Philippines. Hyundai also has a lifetime service support contract with the Philippine Navy for the guided-missile frigates previously delivered to the navy.

In March 2022, the Philippines reported that it had selected U.S.-based equity investment firm Cerberus Management Capital with Agila Naval to operate the southern portion of the site as a commercial shipyard. Cerberus was to settle Hanjin’s outstanding debts and in turn assume the South Korean’s 50-year lease on the yard.