[Interview] KIC CEO says seeks 10% returns from overseas project financing

  • 2016-06-03

Korea Investment Corporation (KIC), South Korea’s sovereign wealth fund, may take part in project financing of overseas construction orders secured by domestic companies, only when the prospective investment delivers an expected return of around 10%, said KIC Chief Executive Officer Sung-Soo Eun.

As South Korean companies are s은성수truggling with a sharp fall in overseas orders and financing requirements from contractors, Eun told the Korean Economic Daily in a recent interview that the sovereign wealth fund may make joint participation in project financing together with other firms.

He suggests that construction firms and brokerage houses participate with equity investment in overseas projects, KIC and pension funds extend mezzanine financing via preferred stocks, convertible bonds and bonds with warrants, and banks grant loans.

But the former executive director of the World Bank and deputy finance minister in South Korea said that private firms such as builders and brokerage companies should find high-yielding construction projects first and prove their profitability to extract investments from KIC, banks and other investors

“KIC would never become Santa Clause. We can invest only when expected returns are around 10%,” Eun said.

Likewise, KIC may consider an equity investment in overseas energy development projects which South Korea’s state-run energy companies may sell to private firms as part of restructuring efforts, on the conditions that private companies take a leading role and prove profitability of the projects. But for now, KIC is not considering such investment, Eun added.

In May, KIC said it was aiming to pick two to three domestic asset management firms or securities houses to manage a $2 billion fund to invest in overseas infrastructure projects involving South Korean companies. 

The CEO projects KIC assets under management to reach $105~$110 billion by year’s end, from the current $96 billion. It is aiming to boost its AUM to $200 billion by 2020, by when it will lift the portion of alternative assets to 20% from 14% at the end of May.