This article was published on April 2, 2025, at 6:02 p.m. on the ChosunBiz MoneyMove website.
Korea District Heating Corporation is pushing for the sale of a minority stake in Shinan Green Energy. This is aimed at improving its financial structure through restructuring the equity of non-core business investments. Shinan Green Energy is a wind power company established through investments from POSCO INTERNATIONAL and SK Innovation as part of an eco-friendly power generation business.
On April 2, investment banking (IB) industry sources reported that Korea District Heating Corporation has selected Dasan Accounting Corporation as the sale advisor for Shinan Green Energy and has begun the formal sale process, including distributing teaser letters to potential buyers. The target for sale is the 834,600 shares (10%) of common stock in Shinan Green Energy held by the corporation. The selling side plans to conduct the main bidding by the end of April for buyers who submitted letters of intent (LOI).
Shinan Green Energy is a company that sells electricity produced at the onshore wind power complex in Jeonnam's Sinan County and renewable energy certificates (REC). It was established in 2013 as a special purpose company, Angel Wind Power, before changing its name to Shinan Green Energy and starting commercial operations. Currently, POSCO INTERNATIONAL holds a 54.53% stake as the largest shareholder, followed by SK Innovation (35%), Korea District Heating Corporation (10%), and MERITZ Securities (0.47%).
Shinan Green Energy has signed a long-term REC sales contract for 20 years with POSCO INTERNATIONAL and SK Innovation, enabling stable cash flow generation. An industry insider noted, "Given the lack of new permits for onshore wind, there is a scarcity of investment," and explained that it is a suitable equity for companies required to implement eco-friendly energy policies such as RE100 and ESG management at the initial investment stage.
Shinan Green Energy records an operating profit of 6 billion to 7 billion won annually. As of the end of 2023, revenues and operating profits were recorded at 19.7 billion won and 6 billion won, respectively. Earnings before interest, taxes, depreciation, and amortization (EBITDA) stand at 10.3 billion won. The selling side emphasized in the teaser letter that "the government plans to develop the Sinan and Mokpo areas into a base for both onshore and offshore wind power to achieve carbon neutrality," adding that there is a high likelihood of new business participation opportunities upon acquisition of equity.
However, the scale of project financing (PF) loans amounts to 140 billion won, which is seen as a negative factor. There are long-term borrowings of 31.6 billion won from Tongyang Life Insurance (senior loan), 83.2 billion won from the Industrial Bank of Korea (senior), and 25 billion won from the National Agricultural Cooperative Federation (subordinated loan). Shinan Green Energy has provided collateral consisting of land and buildings worth 200 billion won and machinery and equipment.
Korea District Heating Corporation is promoting the sale of non-core assets to improve its financial structure. This decision comes in response to the deterioration of its financial structure due to reasons such as a negative margin structure that sells energy below cost. As of the end of last year, Korea District Heating Corporation's revenues and operating profits were 3.5703 trillion won and 327.9 billion won, respectively. In 2022, it recorded an operating loss of 400 billion won and set up a financial rehabilitation plan.
Accordingly, it sold facilities such as Huses and Windmill Power, which are district cooling and heating companies. In November 2023, it bundled a 27% stake in Windmill Power with a 29% stake in Hana Bank for sale. A 49% stake in Huses was acquired by Samchuly for approximately 29 billion won through the exercise of preemptive rights.