SEOUL, July 5 (Korea Bizwire) – South Korean companies’ overseas project investments are more likely to be accelerated as the nation’s official export credit agency has decided to make its first-ever equity investment in a Korean consortium-led privately-funded power plant in overseas market.
The Export-Import Bank of Korea (Korea Eximbank) announced on July 3 that it entered into a memorandum of understanding with Korean Southern Power (KOSPO) and Samsung C&T to jointly invest in Kelar combined-cycle power plant located in Mejillones, North of Chile, a first private power plant to be built by a Korean consortium. The Kelar power plant will have a capacity of 517 MW and will supply the power needs of the mining activity of Minera Escondida and its associated activities, belonging to BHP Billiton, about 200 kilometers southeast of the plant.
The power plant, worth US$600 million, to be completed during the latter half of 2016, is expected to supply the power for 15 years, according to the plan. Korea Eximbank already offered US$380 million loan and guarantee in the form of project financing in late June.
In accordance with the MOU, the three parties will work on the detailed plans including the amount and types of equity investments in the plant project. According to the bank, the three parties will discuss making another equity investments like this in the near future.
If real investment is made by the Eximbank in the form of equity investment on the power plant, the synergy effects are likely in the real economy and financial sectors: The investors might benefit from the enhancement of the project viability and credibility, as well as the reduced investment risk and earlier investments retrieving which in turn might be used in other business opportunities.
“As we will make our equity investments into the special purpose company (SPV) set up by Korean companies for the private overseas project, this kind of investment will pave the way for accelerating the overseas investment development by Korean companies.” said an official with the Korea Exim Bank. He also added, “We plan to raise our stake in the invested project so that Korean companies may make aggressive advance into larger-scale private development projects overseas.”
Currently, global infrastructure and plant market is rapidly transforming from the subcontractors-dependent projects to financing and investment development projects initiated by the contractors.
South Korean government, in line with this emerging trend, outlined a guideline called “measures for overseas construction and plant order-taking advancement” and encouraged the Eximbank would make aggressive equity investments to this end. The Korea Eximbank also set up a new department responsible for the TF dedicated to investment business in line with this changing moves.
Written by John Choi (email@example.com)