Korean fund, brokerage firm buy UK solar power plant portfolio for $36 mn

The Construction Workers Mutual Aid Association (CWMA) and Korea Investment & Securities Co. Ltd. have invested around 38 billion won ($36 million) to acquire a portfolio of four small-scale solar power plants in southern England, which are expected to deliver annual return in the 7% range over the next two decades.

An unidentified UK asset manager bundled together the four power plants with a total generation capacity of 16MW in a package and sold them to Korea Investment late last year.

They were part of assets the UK asset manager had owned through a listed fund and have a generation capacity under 5MW each.

Korea Investment recently completed the resale of 33 billion won ($31 million) worth of equity interests in the portfolio to the CWMA, a $3 billion retirement fund, according to investment banking sources on April 3.

Korea Investment also invested 5 billion won in the portfolio via a pension account it is managing.

KDB Infrastructure Investment Asset Management Co. Ltd. launched a domestic fund with a maturity of 20 years for the investment.

“It cherry-picked blue chips among assets the fund owned,” said a Korean Investment source, referring to the deal.

The plant portfolio is expected to provide stable returns over a longer period of time.

Under the Feed-in Tariff (FIT) scheme introduced in 2010, the UK government pays a generation tariff to small-scale renewable electricity generators for export to the National Grid.

Despite sharp cuts to the tariff rates in 2016, the four plants will continue to receive the same rates set under the old FIT scheme because they started operating in 2011.

The pound’s weakness and low borrowing costs in Britain made infrastructure and real estate in the UK more attractive than other regions, following the Brexit decision in 2016.

Last year, South Korean institutional investors pumped $1 billion in the UK’s major infrastructure facilities, including the gas distribution networks of National Grid Plc. and the UK’s only high-speed rail line, High Speed 1.

In March, South Korean retirement funds and insurance companies, including the Public Officials Benefit Association, bought a 20% stake in the operator of London Orbital Motorway, the M25, for £184 million ($255 million).

By Jung-hwan hwang and Daehun Kim

jung@hankyung.com

Photo: Getty Images Bank