NPS bets on South Korea’s renewable energy sector

The country’s public pension scheme has committed a total of $265m to two domestic funds.

South Korea’s National Pension Service has announced two commitments of 150 billion South Korean won ($132.9 million; €116.1 million) each to two domestic funds focused on renewable energy and managed by Samchully Asset Management and Shinhan Alternative Investment Management, respectively.

Shinhan’s fund will be targeting opportunities within the Korean renewables sector, including wind, fuel cells, and energy storage systems. “Now is the appropriate time to invest in renewables in Korea thanks to a supportive government policy, clear regulatory framework, and potential value-add opportunities,” a source familiar with the matter told Infrastructure Investor.

NPS is acting as the anchor investor of the vehicle that has also raised 60 billion won from the Shinhan Group and has a hard-cap of 300 billion won, the source said. The firm is aiming to hold a final close “by the end of this year or early next year” due to the number of deals waiting in its pipeline, the source said. The fund is said to be targeting at least high single-digit returns.

Samchully’s vehicle, which has yet to be named, is aiming to raise 300 billion won, and targets “mainly solar PV and wind farms in OECD countries, as well as South Korea”, Changseok Lee, a managing director at Samchully, told Infrastructure Investor.

“The South Korean government plans to generate 20 percent of its power from renewables by 2030, which is attractive for investors,” he said. The fund is planning to invest 70 percent of its capital in South Korea and deploy the remaining 30 percent overseas.

“We believe it was our experienced manpower and infrastructure investment track record that was the most important competitiveness among others,” Lee said.

Samchully, which was established in 2008 as a joint venture between Korean energy provider Samchully Group and Macquarie, declined to disclose the total amount raised by the vehicle so far.

The firm specialises in energy investments in North America, but its portfolio also includes debt investments in Korean energy firms.

NPS’s latest commitments come just three months after the $576.5 billion pension scheme issued a request for proposal for funds investing in renewable energy. According to the RFP, once the mandate is awarded, the vehicle can invest in offshore assets totalling 30 percent of NPS’s commitment to the fund.

The pension fund’s alternatives portfolio currently stands at 10.7 percent, slightly below its 12.5 percent target.

NPS and Shinhan declined to comment for this article.