Hana Financial underwrites $117 million senior loan for US energy storage system

Hana Financial Investment Co., Ltd has invested in an energy storage system development project as an underwriter for senior loans worth $117 million. The ESS will be located near Los Angeles, California and it will be the first time that a local securities firm has invested in an overseas ESS.

Hana Financial will sell down the assets to Korean institutional investors such as mutual aid associations and insurers. A local major institutional investor has already acquired nearly half of the total amount, according to industry sources.

Capital Dynamics, a US-based private equity firm specialized in new renewable energy, is in charge of the $200 million financing, and the US-based electric vehicle and ESS manufacturer Tesla is in charge of the facility’s construction and operation.

Hana Financial itself has made some investments into the project’s $50 million (approximately 59.6 billion won) mezzanine loan. Capital Dynamics will account for equity investments aside from senior and mezzanine loans.

The local securities firm’s incursion into overseas ESS may signal that domestic alternative asset industry players are diversifying their infrastructure portfolio by exploring new assets such as ESS.

ESS stores energy and supplies it to the market later when needed. California is the largest ESS market in the world as an active proponent of clean energy. ESS can address the duck curve, a side effect caused by increased use of renewable energy. A duck curve occurs when there is an imbalance between the energy's demand and supply because renewable energy is affected by the time change, weather, and other factors. This causes the energy market to be volatile which is why California is keen on fostering ESS.

“It is mandatory in California to secure a certain amount of ESS for utility companies,"  said a source from Hana Financial.

An ESS makes profit by taking advantage of the difference in hourly electricity rates. For example, ESS can purchase electricity during hours when it is inexpensive and sell it during expensive hours. It also works with California-based utility companies and receives fees in exchange for storing energy and for stabilizing the supply and demand in the energy market.

ESS has higher cost competitiveness compared to traditional power plants because the system can secure energy without production cost.

 

Write to Seonpyo Hong at rickey@hankyung.com