Korean firms to buy $88 mn US power plant-backed debts from US bank

Four South Korean institutional investors will acquire 100 billion won ($88 million) worth of senior debts secured on two US gas-fired power plants from CIT Bank, in a rare secondary debt investment for domestic investors.

The unidentified Korean institutions, including insurance and brokerage firms, have decided to invest 55 billion won and 45 billion won in senior debts backed by CPV St. Charles Energy Center in Maryland and West Deptford Power Station in New Jersey, respectively, according to a source of JB Asset Management Co. Ltd. on April 25.

JB Asset, a unit of a South Korean provincial bank, arranged the deal. 

The senior debts are owned by CIT Bank, known for energy infrastructure financing. They are linked to LIBOR rates and have five years left until maturity.

Based on the current LIBOR rates, the investment is expected to return 5% per annum, according to the source.

CPV St. Charles, a gas-fired combined-cycle power facility, began commercial operations in February. West Deptford has been in commercial operation since November 2014. 

South Korean investors have been piling into US energy projects amid expectations of US interest rate rises. But they mainly participated in syndicated loans sold by US power plant developers, or purchased equity ownership as financial investors after the construction of power plants is completed.

The JB Asset source expects that secondary debt investments in US power facilities will accelerate as strict capital regulations on US banks force the lenders to continue to put their assets on the market.

Earlier this year, a pool of Korean institutional investors decided to jointly acquire a 4.7% stake in UK gas distribution networks for  £285 million ($364 million), in secondary infrastructure investment.

By Daehun Kim

daepun@hankyung.com