Prostar buys majority stake in Korean gas distributor

Prostar Asia-Pacific Energy Infrastructure Fund and funds and accounts managed by BlackRock’s infrastructure unit have bought a more than 95% stake in the business, following a competitive process. The size of the transaction was not disclosed, but Korean media previously reported that the valuation was about KRW550 billion ($487 million).

Anchor acquired a 27.8% stake in Kyungnam in 2014, paying KRW75 billion, according to AVCJ Research. Sangwon Comtru remained the largest single shareholder with 30.1%. The company was delisted from the Korean Stock Exchange in May of last year.

Established in 1972, Kyungnam is the largest independent city gas distributor in Korea, with an exclusive license to supply gas to nine cities and counties in the Gyeongsangnam-do province. It has more than 600,000 residential, 900 industrial, and 50,000 commercial customers, and a pipeline network of 1,995 kilometers. The company sold 38,000 terajoules of gas in 2016.

Kyungnam recorded revenue of KRW621.3 billion in 2016, down from KRW724.8 billion the previous year. However, net profit increased from KRW22.5 billion to KRW28.6 billion over the same period. Prostar said in a statement that substantial capital investment is required to meet the province’s growing energy needs. It will work with the existing management team on developing the network.

Prostar was established in 2012 and invests in mid-stream energy infrastructure assets. According to a filing from May of last year, the Prostar Asia-Pacific Energy Infrastructure Fund had a corpus of $200 million. AVCJ understands the GP raised $400 million, including a co-investment program. Washington State Investment Board previously committed $100 million to the fund and $100 million to an oil terminal co-investment. Prostar invested in Fujairah Oil Terminal in the United Arab Emirates in 2013 and 2015.

Kyungnam represents the first investment through a newly established platform dedicated to building a diversified portfolio of gas distribution assets across Asia Pacific. Prostar said it wants to construct a portfolio that can utilize operating efficiencies and robust cash flows, with minimal commodity price risk.

This platform-style approach - seen as a means of aggregating assets in order to reduce geographical risk and create more exit options - is employed by several other energy and infrastructure investors in the region, including Equis Funds Group and India’s ICICI Venture.

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• Topics
• North Asia
• Infrastructure
• Industrials
• Buyouts
• Trade sale
• South Korea
• energy
• Prostar Capital
• BlackRock