Korean firms complete $320 mn financing for Newark Energy Center of US

Aug 17, 2016 (Gmt+09:00)

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South Korean insurance firms and other institutions have committed a total of $250 million to a local fund set up to provide senior loans to Newark Energy Center in New Jersey, while two domestic lenders provided a combined $70 million loans to the commercial power plant, according to investment banking sources on August 16.

The loans will be used for refinancing of the U.S. power plant that had sought to refinance $675 million loans, after it began commercial operations in May 2015.

The financing in South Korea was completed after a domestic brokerage firm, NH Investment & Securities, sold down its interest worth 85 billion won ($78 million) in the fund to other local financial institutions, including ING Life Insurance, National Credit Union Foundation of Korea and Shinhan Capital. NH Investment was in charge of the local financing and had tried to sell down its interest.

Newark Energy Center, wholly owned by Energy Investors Funds, a private energy equity firm, provides electricity for northern New Jersey and the regional power grid. The gas-fired plant in Newark provides electricity to power approximately 700,000 homes.

The local fund arranged by NH Investment all consists of senior loans with a seven-year maturity. It had drawn strong interest from Korean investors, because of its low volatility and stable income expectations. The expected return of the fund is about 5.5% a year. Those which have participated in the fund include Nonghyup Life Insurance, Nonghyup, Hyundai Life Insurance, Shinhan Life Insurance, Dongbu Insurance, KB Life Insurance and IBK Insurance.

Meanwhile, to acquire the interest of NH Investment in the fund, ING Life and National Credit Union Foundation will pony up 30 billion won, respectively, with Shinhan Capital to pay another 10 billion won. It was not immediately known which other investors also joined hands to buy the interest from NH Investment.

Earlier, Newark Energy Center had raised $285 million for the purpose of refinancing in the United States. GE Capital, Industrial and Commercial Bank of China and Siemens participated in the financing, lead-managed by Citibank.

By JiHoon Lee

lizi@hankyung.com