This article was published on Sept. 2, 2025, at 5:19 p.m. on the ChosunBiz MoneyMove website.
SK Innovation's sale of equity in the Boryung LNG terminal in South Chungcheong Province has been successful, drawing industry attention to the potential sale price. As SK is pursuing this sale to secure liquidity, there is an expectation for the sale price to be recognized at over 600 billion won.
While the industry agrees that the Boryung LNG terminal is an attractive asset, there are talks that "600 billion won will be the upper limit." This is due to the inherent limitations on upside potential given that it is a dedicated LNG terminal.
According to investment banking (IB) industry sources on the 2nd, IMM Investment, Macquarie Asset Management, the Noan Partners-Korea Investment & Securities consortium, and the Canada Pension Plan Investment Board (CDPQ) have been named as qualified candidates on the shortlist for the 50% equity acquisition of the Boryung LNG terminal.
Among the four candidates, CDPQ is considered relatively disadvantaged due to the potential for "strategic asset outflow from the country," leading to speculation that the competition will effectively become a three-way battle among IMM Investment, Macquarie, and Noan Consortium.
Price competition heated up from the preliminary bidding stage. Some candidates are reported to have offered prices exceeding 600 billion won. Initially, many in the market viewed 400 billion to 500 billion won as a reasonable valuation, but as competition intensified, valuations skyrocketed in a short period.
The Boryung LNG terminal began commercial operations in 2017 and currently has seven LNG storage tanks with a capacity of 200,000 kiloliters (kl), vaporization and dispatching facilities capable of handling 1,400 tons (t) per hour, and a LPG storage tank of 45,000 tons capacity. Its main customers are SK and GS affiliates, with an annual total throughput reaching 7 million tons. Even after SK Innovation sells 50% of its equity, ongoing sales to SK are expected for the next 20 years, as it has already signed a Terminal Use Agreement (TUA) with the Boryung terminal.
The usage fee is determined based on a comprehensive cost method that includes appropriate profits along with total incurred costs (such as depreciation and operating expenses), generating stable cash flow regardless of economic fluctuations. Last year, the Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) for the Boryung LNG terminal was approximately 180 billion won, and to meet the requirements of the project financing (PF) lenders, a debt service coverage ratio (DSCR) of 1.2 or more is maintained. This means that the operating cash flow is designed to be at least 1.2 times the debt repayments, classifying it as a typical "core infrastructure" asset capable of providing stable dividends.
An IB industry source noted, "While the upside potential is limited, it was able to succeed due to the prospect of stable long-term revenue."
However, some in the industry suggest that realistically, it will be difficult for the sale price to exceed 600 billion won.
If the 50% equity is acquired for 600 billion won, the value of 100% equity would be 1.2 trillion won, and with net debt of 1.08 trillion won added, the enterprise value (EV) would total 2.28 trillion won. Dividing this by last year's EBITDA of 180 billion won results in an EV/EBITDA multiple of 12.7 times.
Considering that the target internal rate of return (IRR) for infrastructure funds is around 8% to 10%, the valuation of EV/EBITDA at 12.7 times is close to a psychological barrier, according to industry sources.
Another issue is that due to the nature of LNG terminals, there are limitations on upside potential, making it difficult to increase revenue. In contrast to generic terminals, which can enhance profitability through various revenue sources like liquid bulk and transshipment, the Boryung terminal is focused solely on the specialized functions of LNG storage, vaporization, and dispatch.
Additionally, unlike generic terminals that can raise short-term rates when demand surges, the usage fee for the Boryung LNG terminal is fixed as "cost + profit," making it difficult to raise charges for additional revenue, even if LNG demand spikes.
Ultimately, the potential for upside depends on whether expansions can occur. However, there are many obstacles in this regard. Land has not been secured, and the process for new permits is lengthy. Also, due to the structure of PF, it's essential to obtain lender approval, which industry sources say is not easily achieved.