Scientists fund, other Korean investors in $665 mn Japan solar power plant deal

Korea Scientists and Engineers Mutual-aid Association (SEMA) and other South Korean institutional investors will invest an aggregate 150 billion won ($133 million) in acquiring a Japanese solar power project, in a deal worth 750 billion won ($665 million) involving debt.

It will mark the largest investment in a Japanese solar power project by South Korean asset owners, following a string of their recent investments in new energy projects abroad for better yields.

South Korea-based private equity firm Lantern Advisory & Investments (A&I) has raised 100 billion won from SEMA and other Korean institutions for the acquisition. Lantern A&I will channel into the buyout deal an additional 50 billion won from another fund it has launched.

The Korean investors will buy equity interests in the project, which is to build seven solar power plants in Tokyo and Kyushu, from a Japanese energy developer, and borrow 600 billion from Japanese banks to finance the acquisition.

The investment is expected to generate an internal rate of return of over 10% per annum, according to industry sources on Sept. 13.

“Solar power plants begin commercial operation shortly after solar panels are installed, once the construction is completed. One of their merits is that we can start to redeem our investment early,” an investment banking source told the Korean Investors.

The investors will begin to put money in the project when the construction of each plant begins for a three-year period. Their total investment period is 20 years after the construction is completed.

Five of the plants will be located near Tokyo and two others in Kyushu, with generating capacity of 13 MW to 70 MW respectively. They are under power supply contracts with regional utilities in Tokyo and Kyushu.

Their combined generating capacity is 230 MW, enough to supply electricity to a small city with 300,000 to 400,000 populations.

In 2015, South Korean insurance companies, including Kyobo Life Insurance Co. Ltd., invested tens of millions of dollars in a Japanese solar power plant. Last year, KDB Infrastructure Asset Management, a unit of state-run Korea Development Bank, collected 260 billion won in a fund to invest in Japanese solar power plants.

Lantern A&I was founded by Seung-hoon Lee who had worked for a solar power-related company in Japan.

Lantern A&I will hire South Korean solar photovoltaic manufacturers and technology services companies to run the power plants in Japan.

By Daehun Kim

daepun@hankyung.com