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Secondary deals

HOLD: Korean teachers' fund exits Aberdeen's PPP projects

KTCU sold interest in Aberdeen PPP infrastructure fund for over $200 mn

By The Wall Street Journal Jul 05, 2021 (Gmt+09:00)

(Source: Getty Images Bank)
(Source: Getty Images Bank)

The Korean Teachers' Credit Union (KTCU) has secured a return more than twice its A$100.8 million ($77 million) eight-year investment in a public-private partnership (PPP) fund, after it cashed out of the holding in a secondary transaction. 

Earlier this month, the KTCU sold its interest in Aberdeen Asset Management's first PPP Infrastructure fund for 238 billion won ($213 million) to an unidentified third party, according to investment banking sources on June 6. 

The South Korean retirement fund decided to dispose of the holding, equivalent to a 78.4% stake in the PPP fund, after it received an attractive offer from the third party, the sources added. 

Including the previous dividend income of 41.4 billion won, the KTCU netted a combined 173 billion won in profits from the investment. 

That translated into a 2.63 multiple of its invested capital and a 17.8% internal rate of return. The IRR is even higher than the typical 6-7% from PPP investments.

Back in 2013, the teachers' fund had contributed A$100.8 million to the PPP infrastructure fund that raised A$138 million in total. The KTCU had committed the money via Mirae Asset Management Co.

The fund's portfolio consists of three infrastructure assets in Australia and one in the US. In detail, it acquired a 45% interest in the project to build and operate Denver FasTracks, high-speed commuter and light rail lines, for A$24.4 million in 2019.

In Australia, the fund took over a 17.3% stake in the project to build and operate New Royal Adelaide Hospital in Adelaide, South Australia, for A$63.5 million in 2017; 49.9% of Mundaring Water Treatment Plant, Western Australia, for A$24.4 million in 2013; and 25% of the manufacturing and operation of rolling stock in Australia, Queensland New Generation Rolling Stock, for A$26 million in 2019.

After all those assets became operational from late 2019, the KTCU had weighed either divestment or increasing its interest in the fund for additional investment, until it received the secondary deal offer.

New Royal Adelaide Hospital in Adelaide, South Australia
New Royal Adelaide Hospital in Adelaide, South Australia

"Given the strong demand for PPP investments globally, it seems the KTCU sold the stake at an appropriate time with good terms," said an infrastructure investment industry source.

In an interview with The Korea Economic Daily last October, CIO Kim Ho Hyun said that the $30 billion savings fund sets its sights on PPP projects in developed countries, renewable energy and data centers. These investments are seen less vulnerable to the impact of the global pandemic and tend to generate a steady stream of income, he added.

The KTCU's other infrastructure deals include a $130 million investment in a $1 billion seawater desalination facility in San Diego, California in 2015; $100 million in an Australian seawater desalination PPP project in 2014; and $70 million in a PPP project to build outer circular roads in Melbourne, Australia in 2011.

Last year, the KTCU achieved its highest investment return in 11 years of 10%, led by substantial gains from domestic equities and from the divestment of Ellie Mae Inc., a US cloud-based platform provider.

Write to Jun-ho Cha at chacha@hankyung.com

Yeonhee Kim edited this article.

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