This article was displayed on ChosunBiz MoneyMove at 4:23 p.m. on July 15, 2025.
Domestic private equity fund (PEF) operators SG PE and SKS PE are facing difficulties in the sale of Changwon Enertech. Until last year, mergers and acquisitions (M&A) of waste companies such as Ecorbit, KJ Environment, and J&Tech were active, but companies with declining performance are struggling to find suitable buyers as their corporate values have decreased.
According to the investment bank (IB) industry on the 15th, the SG PE-SKS PE consortium has been searching for a corporation to acquire Changwon Enertech for the fourth consecutive year. Changwon Enertech is a waste intermediate treatment company that produces and sells steam using thermal energy generated from business site waste and waste solid refuse fuel (SRF) incineration. Last year, Zen Partners agreed to acquire it, but the sale fell through.
Zen Partners even signed a stock purchase agreement (SPA) to acquire Changwon Enertech for 130 billion won, but failed to secure financing due to poor performance. Changwon Enertech posted an operating profit of 4.3 billion won in 2022 due to rising energy prices, but recorded an operating loss of 1.4 billion won in 2023, shifting to a deficit, and the loss widened to 4 billion won in 2024. During the same period, the net loss increased from 4.1 billion won to 7.8 billion won.
The previously rising waste treatment costs have begun to decline, and the increase in the cost of waste raw materials appears to have impacted profitability. Additionally, Han Nam Environment, which was acquired through a bolt-on strategy after acquiring Changwon Enertech, recorded a loss of 2.3 billion won, adversely affecting performance.
To establish a value chain for collection, transportation, and treatment, Changwon Enertech acquired Daebu Development, a waste collection and transportation company, for 15.6 billion won in 2021, and in 2022, it purchased Han Nam Environment, another waste collection and transportation company located in Yeongcheon, Gyeongbuk, for 11.4 billion won.
An IB industry insider noted, "Since the COVID-19 pandemic, the volume of waste, such as delivery containers, has surged, making it difficult to expand landfill capacities due to regulatory issues. While waste processing capabilities have increased, demand has decreased, leading to lower treatment costs."
Despite efforts to enhance corporate value even with bolt-ons, the performance has deteriorated, and the sale of Changwon Enertech is likely to drift for a while. Another IB industry source stated, "The biggest advantage of waste companies is stable cash flow, but selling a deficit corporation will not be easy. There seems to be little room to raise corporate value now that bolt-ons have already been executed."
SG PE-SKS PE selected Samil PwC as the sales manager for the disposal in the first half of 2022 and has been pushing for a sale. At the time, interest in waste companies soared, and Changwon Enertech's performance showed an upward trend, prompting several potential buyers to pursue acquisition. However, the sale failed due to mismatches in price expectations between the buyers and sellers.
SG PE-SKS PE is in a situation where it must accelerate the sale since it acquired Changwon Enertech in 2019. At that time, they invested 42 billion won to purchase 100% equity of Changwon Enertech. Along with the acquisition of shares, they also bought 24 billion won worth of convertible bonds (CB). To finance the acquisition, SKS PE raised a project fund in the 30 billion won range, while SG PE invested around 20 billion won. The rest was utilized from a blind fund formed jointly by SKS PE and Shinyoung Securities.