This article was published on Aug. 6, 2025, at 8:31 a.m. on the ChosunBiz MoneyMove site.
It has been confirmed that LG Energy Solution and global private equity firm Kohlberg Kravis Roberts (KKR) have joined forces for the battery energy storage system (BESS) project promoted by the government. BESS is a device that can store excess power, and the government plans to sequentially select operators to manage a total of 20 gigawatts (GW) of BESS by 2038. The market size is estimated to approach 40 trillion won.
On the 6th, according to the investment banking (IB) industry, LG Energy Solution and KKR recently established a joint venture called 'Korea Gigaplatfrom.' The capital is set at 10 billion won, and the representative director is Matthew Ko, a Singaporean national, who is the director of KKR's Asia-Pacific infrastructure team.
The BESS project, led by the Ministry of Trade, Industry and Energy, aims to install 540 megawatts (MW) of BESS across the country. The goal is to secure a total storage capacity of 3,240 MWh based on a 6-hour operation. 500 MW will be installed in inland areas, such as Honam, and 40 MW will be established on Jeju Island. Power generation companies will finance the projects through project financing (PF) from banks and other financial institutions, and if they build and operate the BESS, the Korea Electric Power Corporation will purchase power at a fixed price.
The BESS project will not be a one-time event. Over four years, the plan is to select design, procurement, and construction (EPC) contractors in increments of 540 MW. Last month, eight businesses, including Korea Southern Power (KOSPO), were selected in the first round, and the second selection process for operators will begin in September. Considering that the total project cost (including financing costs) for just this first round amounted to approximately 2.5 trillion won, around 10 trillion won is projected to be invested in total, assuming that unit prices will not decrease in the future.
LG Energy Solution and KKR joined hands to supply batteries and execute investments. Once the operators are selected, LG Energy Solution will supply lithium iron phosphate (LFP) products, while KKR will provide funds in the form of mezzanine financing. The strategy is based on the judgment that, due to LG Energy Solution's competitive advantage in product strength, they can dominate the market while maintaining supply prices and mezzanine rates above a certain level.
Companies bidding for the BESS project will first decide which company's batteries to use and then submit proposals based on the specifications of those products, including pricing. The market is effectively dominated by LG Energy Solution and Samsung SDI. During the preliminary project before the first round (with a scale of 65 MW), all selected operators opted for LG Energy Solution's LFP products. However, in the second round, of the eight companies, six chose Samsung SDI's nickel-cobalt-aluminum (NCA) products, while only two selected LG Energy Solution's products.
This time, it has been reported that there was intense price competition between LG Energy Solution and Samsung SDI behind the scenes. As a result, the bidding price originally expected to be in the low 30 won range per kilowatt-hour (kWh) has fallen to around 29 won. Those bidding in partnership with Samsung SDI have reportedly submitted bids around 29 won.
However, the expected return on investment for KKR entering this project through mezzanine financing is projected to be low. This is due to the nature of the BESS business, where the upside is capped. The BESS project has a structure where revenue is predetermined based on a long-term fixed contract with the Korea Electric Power Corporation (KEPCO).
Nonetheless, industry insiders speculate that KKR's reason for wanting to participate is due to the market's potential for expansion. The government and the related industry estimate that the domestic BESS market size will reach 40 trillion won in the long term, including equipment, construction, and maintenance. For the renewable energy market to continue growing, BESS is essential. Just as EPC contractors are rushing their infrastructure investments in anticipation of long-term demand, KKR seems to be hoping for early entry benefits.