This article was published on July 16, 2025, at 8:25 a.m. on the ChosunBiz MoneyMove site.
Private equity fund (PEF) manager Affirma Capital is pursuing the acquisition of its third waste disposal company. Following the acquisition of Jentech last year and CEK this year, it has recently been selected as a candidate on the shortlist for acquiring Koentec.
Affirma's common strategy when acquiring Jentech and CEK was that it did not use acquisition financing. If selected as the preferred negotiator for Koentec, it plans to purchase it entirely with equity, without loans. This is related to the waste incineration and landfill costs. If acquisition financing is used, a certain level of performance must be achieved according to financial covenants, and given the current low waste treatment costs, increasing incineration and landfill volumes might lead to diminished profitability.
According to the investment banking (IB) industry on the 16th, Affirma was recently included in the shortlist for acquiring Koentec, which is being sold by the E&F Private Equity and IS Dongseo consortium for 1 trillion won. It is competing against Ecorbit, Goe Capital Partners, and a French strategic investor.
Previously, Affirma partnered with The Hahm Partners to acquire the waste landfill company Jentech for a total enterprise value of 510 billion won in September of last year. In June of this year, it signed a contract to acquire about 5 to 6 waste management-related companies, including CEK (formerly KC Environment Services), from the Singaporean investment firm Equus Development for 400 billion won. This time, it plans to bolt on Koentec to make it a total of three companies it has acquired.
Notably, Affirma did not utilize acquisition financing when acquiring the two companies. Using acquisition financing would require attaining a certain level of earnings before interest, taxes, depreciation, and amortization (EBITDA) due to covenants with creditors, and it judged that it should not be constrained by such agreements at this time.
According to relevant industry sources, the national average incineration cost last year was 214,000 won per ton (t). The expected cost for this year is 230,000 won, 250,000 won for next year, and 270,000 won for 2027. It remains at a low point.
An IB industry official said, "From 2020 to 2023, the ratio of cement companies using waste as incineration materials instead of bituminous coal increased, leading to a decrease in waste to be incinerated and lowering incineration costs." The official explained that as the construction economy deteriorated, cement companies' costs for investing to gain more caloric energy from waste incineration have decreased, reaching a limit on using waste to replace bituminous coal, which has led to more waste being sent to incineration plants.
Affirma assesses that the national average waste landfill cost is still at a low point. Last year, it was only 65,000 won per ton, which is significantly lower compared to 100,000 won in 2021. The industry estimates that it will rise to 70,000 won this year, 80,000 won next year, and 95,000 won by 2027.
If landfill capacity is filled excessively while the landfill costs are low, the company's profitability is bound to decline. From the company's perspective, it needs to landfill more when prices are high to improve profit margins and share more revenue with limited partners (LPs).
Affirma plans to avoid financial covenants by investing only with equity at this time and then utilize acquisition financing for a recapitalization in 2026-2027.