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  • North Asia

Korea's STIC to exit biofuels player to PE-backed consortium

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  • Justin Niessner
  • 18 October 2023
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Korea’s STIC Investments has agreed to sell biofuels producer Daekyung Oil & Transportation to a consortium backed by SK Group, Korea Development Bank (KDB), and Eugene Private Equity.

The buyers plan to invest via a special purpose company to be 40% controlled by SK, acquiring a 100% stake in Daekyung O&T for a reported KRW 500bn (USD 378m). KDB and Eugene will share the remaining 60% of the acquiring entity. Their respective holdings were not disclosed.

STIC acquired a 70% stake in the company in 2017 for about KRW 94.5bn, according to AVCJ Research. KDB had acquired a 26.3% stake alongside local GP TStone Corp in a KRW 50bn deal in 2011.

STIC said the sale is expected to deliver it a more than 3x return and help give the STIC Growth Engine M&A Fund an IRR at the high end of the 10%-20% range.

Established in 1995, Daekyung O&T uses animal fats from slaughterhouse waste and used cooking oil (UCO) from restaurants and food factories to make biodiesel and bio-aviation fuel. With 13 production sites nationwide, it is considered the largest domestic producer of its kind.

Animal fats and UCO are gaining attention as key raw materials for bio-aviation fuels and sustainable aviation fuels (SAFs). These materials are not subjected to global regulations due to their waste-recycling nature, and they offer greater carbon reduction benefits compared to plant-based raw materials like soybean oil.

SK noted that unlike ground transportation – which is transitioning to batteries and fuel cells – aviation transportation is constrained by battery density limitations and safety, making the use of liquid fuel unavoidable for the future. As a result, alternatives such as biofuels and synthetic crude oil are gaining traction.

Earlier this year, SK invested in Sichuan Jinshang Environmental Technology, a Chinese UCO company exploring expansion into bio-aviation fuels.

“Proactive preparation for the SAF market, in line with the ‘Carbon to Green’ strategy of SK Innovation and its subsidiaries, is absolutely essential for the sustainability of the aviation fuel market,” SK Trading International CEO Suh Sok-won said in a statement.

“SK Trading International’s efforts will not stop at investing in Daekyung O&T. We will continuously make efforts domestically and internationally to evolve into a specialized trading company that provides a stable supply of SAF to the domestic and global aviation industry.”

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