Darby buys stake in Korean wind farm

Franklin Templeton's private equity arm places a value of $77 million on Korea's largest wind farm and negotiates a 32% stake along with board representation.
Darby Overseas Investments, the private equity arm of Franklin Templeton Investments, has acquired a 32.4% equity stake in Gangwon Wind Power for W34 billion ($25 million).

Gangwon Wind Power was established in 2001 to construct a wind farm in Gangwon Province in eastern Korea. The wind farm is now the largest in the country û and among the largest in Asia û with more than half of Korea's installed wind power capacity, as of the end of 2007. Total installed wind capacity in Korea has multiplied to 191MW in 2007 from 7.9MW in 2001 and the Korean government has set targets to grow this further.

ôBy virtue of its size, Gangwon Wind Power is in a strong position to expand even further by re-powering existing wind turbines or developing additional capacity,ö says DarbyÆs senior managing director for Asia and global infrastructure, David Hudson, in a written statement commenting on the investment. ôOf all renewable energy sources, wind power is one of the most efficient in terms of cost per unit of electricity generated.ö

Darby will route the investment through the Korea Emerging Infrastructure Fund (KEIF). Darby and Korea's Hana Bank closed KEIF in 2006 with W580 billion of commitments, up from a target fund size of W500 billion. KEIF is managed by Darby Hana Infrastructure Fund Management, which is 70%-owned by Darby and 30%-owned by Hana.

Investors in KEIF include the National Pension Service of Korea, the Government Employees Pension Corporation of Korea, Korea Post, Korea Life Insurance, the National Agricultural Cooperative Federation, Dongbu Insurance and Kumho Life Insurance.

KEIF makes private equity investments and provides mezzanine loans to companies involved in Korea's infrastructure sector, including transportation, environment, logistics, energy and utilities.

To date, KEIF has invested about W210 billion, or around 36% of the total fund, in six different companies.

Along with the investment into Gangwon Wind Power , KEIF will have the right to nominate two directors out of the total board strength of seven directors. KEIF has also appointed the statutory auditor of Gangwon Wind Power. Darby anticipates exiting the investment through a trade sale to a strategic investor.

Darby has a stated focus on investments in clean energy and this is the firm's second recent investment in the area in Asia. In early 2008, Darby announced that it had invested Rs700 million ($14 million) in Bangalore-based Bhoruka Power Corp, through Darby Asia Mezzanine Fund II. Bhoruka is involved in the development and construction of small hydroelectric and wind power generation projects.
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