Skip to content
  • KOSPI 3130.09 -23.31 -0.74%
  • KOSDAQ 1039.43 -3.36 -0.32%
  • KOSPI200 409.22 -3.63 -0.88%
  • USD/KRW 1171.7 -0.50 -0.04%
  • JPY100/KRW 1,071.66 3.26 0.30%
  • EUR/KRW 1,384.77 1.40 0.10%
  • CNH/KRW 181.93 -0.01 -0.01%
View Market Snapshot

M&As

GS Energy to sell half of thermal power plant unit to IMM

The GS Group's flagship unit will retain management right over GS Power after a stake sale

By Jul 23, 2021 (Gmt+09:00)

GS Energy to sell half of thermal power plant unit to IMM

GS Energy Corp., an intermediate holding company of South Korea's GS Group, is in the final stages of talks to sell a 50% stake in its wholly-owned thermal power plant operator to IMM Investment Corp. for about 1 trillion won ($870 million).

After the stake sale, GS Energy will retain its management right over GS Power Co. with the remaining 50% stake, according to investment banking sources on July 23.

GS Power is the country's second-largest combined heat and power generator, producing both electric power and heat such as steam and hot water. It holds a dominant market share in the cities of Anyang and Bucheon in the Seoul metropolitan area with an annual profit margin in the range of 10-20%.

The stake deal will take place less than a year after GS Energy bought the 50% stake in the thermal power plant operator back from a consortium of domestic banks at the end of last year for 710 billion won. 

GS Power was a combination of thermal power plants and heating and cooling system operations which GS Caltex Corp., an oil refiner, acquired in 2000 from two power utilities -- Korea Electric Power Corp. and Korea District Heating Corp. -- as part of the government efforts to privatize state-run companies.

In 2012, GS Caltex handed over a 50% stake in the new unit to GS Energy to focus on oil refining and petrochemical businesses, while selling the remaining 50% stake to the consortium of domestic banks for 413 billion won.

The upcoming transaction appears to have little impact on the balance sheet of
GS Energy, 100% owned by GS Holdings Co. The estimated 300 billion won profit from the stake sale might be cancelled out by the additional 300 billion won it had spent to buy back the stake from the banking consortium for 710 billion won at the end of last year.

In 2020, the thermal power operator reported an 11% jump year-on-year in operating profit to 181 billion won, despite a slip in sales.

SECOND DEAL WITH IMM INVESTMENT

The upcoming deal will mark the second transaction between GS Energy and the Korean private equity firm IMM.

In 2015, GS Energy sold a 20% stake in Incheon Total Energy Co., a district heating and cooling systems operator based in the city of Incheon, to IMM and netted a 4.6 billion won in profits.

Three years later, the energy company bought back a 20% in Incheon Total from IMM to bolster its ownership in the subsidiary. The deal generated about 10 billion won in capital gains for the Seoul-based investment firm. 

The energy- to retail-focused GS Group is now ramping up efforts to diversify beyond oil and retail businesses. GS Holdings is in talks to form a consortium to acquire a controlling stake in Hugel Inc., the country’s top maker of botulinum toxin, sources said last month.

IMM is in the process of raising 1 trillion won for its new infrastructure fund with a focus on environmental and waste management, renewable energy, and logistics facilities.

Its portfolio includes port operators HMM PSA New-port Terminal Co. and Hanjin Busan Newport Co.; Hyundai LNG Shipping Co.; Eco Management Co.; and Kang Dong Cold Storage Co.

In 2019, it acquired a 35% stake in Texas Express Pipeline, a joint venture for natural gas liquids transportation, in $1.08 billion co-investment with a US infrastructure investment firm.

Write to Chae-yeon Kim at why29@hankyung.com

Yeonhee Kim edited this article.

Comment 0

0/300