KIND, S-Energy, and Hanyang Jeogong Sign Shareholders Agreement on 25th
To Acquire Over 50% Stake After Capital Increase This Year and Become Major Shareholders
President Jeong Jae-hoon: "Joint Entry with SMEs... Job Creation"
Some Raise Concerns Over Permits, Skilled Workforce, and Price Increase Risks
[Asia Economy Reporter Moon Chae-seok] Korea Hydro & Nuclear Power (KHNP) is investing approximately 20 billion KRW in a solar power project in South America. KIND (Korea Infrastructure & Urban Development Corporation), S-Energy, and Hanyang Electric are joining the investment, and after a capital increase within this year, KHNP plans to become the majority shareholder with over 50% stake. The company stated that it will continue to expand its overseas new and renewable energy projects and contribute to job creation by entering overseas markets together with small and medium-sized enterprises.
KHNP announced that on the 25th, it signed a shareholder agreement at COEX in Seoul with KIND, S-Energy, and Hanyang Electric for joint investment in a solar power project in Chile. The project involves constructing solar power plants with capacities of 6.6MW and 6.4MW, totaling 13MW, in two locations near Santiago, the capital of Chile: Guadalupe and Mariapinto. The plants will be operated for 25 years. KHNP aims to start construction within this year and complete and commence commercial operation by 2021. This marks KHNP's first entry into the South American market.
Chile is considered an attractive investment country because small-scale power producers can generate stable profits with government support. In particular, this project is expected to generate additional revenue through carbon emission rights secured by applying the Clean Development Mechanism (CDM). CDM is a system under the Kyoto Protocol that allows developed countries, which are obligated to reduce greenhouse gases, to invest in developing countries and sell or use the resulting greenhouse gas reductions to meet their reduction targets.
KHNP has led this project development to enter the South American new and renewable energy market. It will participate not only in construction and process management but also in future project management and power plant operation. Based on the joint entry agreement for the Chile solar power project signed last May, KHNP plans to secure follow-up projects and continuously expand overseas new and renewable energy businesses in partnership with domestic small and medium-sized enterprises.
Some caution that thorough verification of the business feasibility in the South American region is necessary. While the intense sunlight, long daylight hours, and investment conditions are attractive, the market is small, and obtaining construction, environmental, and power connection permits can take one to two years, which is burdensome. There is a shortage of skilled local personnel, and securing equipment can be difficult, potentially increasing the construction costs of power plants.
Jung Jae-hoon, President of KHNP, said, "The Chile solar power project will be a leading example of the 'KHNP-style Green New Deal' policy, entering overseas markets jointly with small and medium-sized enterprises that manufacture and export domestic equipment, contributing to increased sales and job creation." He added, "Through this project, we will accelerate the expansion of overseas new and renewable energy projects and fulfill our role as a comprehensive energy company."
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