Korean Road Infrastructure Fund announces two more investments

15 March 2004

Macquarie Bank and Shinhan Financial Group, the joint managers of Korea’s first private infrastructure fund, the Korean Road Infrastructure Fund (KRIF), today announced two further investments.

The investments are the KRW125 billion ($A146 million) acquisition of a 99% interest in Baekyang Tunnel Ltd; and a KRW80 billion (A$93 million) commitment for a 49% stake in the concessionaire of Machang Bridge.

Both investments are unique to the Korean private infrastructure market and fit with KRIF’s strategy of investing in high yielding infrastructure assets with long concession rights.

The Baekyang Tunnel project is one of only a handful of Private Participation in Infrastructure (PPI) toll roads in Korea that currently operate above the government’s forecasted revenue level.  KRIF’s 49% investment in the Machang Bridge project represents the first private investor participation in a greenfield toll road project in Korea and the first project of its kind in Korea to have non-recourse financing.

KRIF Managing Director Nick van Gelder said these two acquisitions significantly strengthen the fund and highlight the infrastructure investment opportunities available to KRIF.

“Baekyang Tunnel has probably the strongest traffic performance relative to initial projections of all privately owned roads in Korea. Having such a strong operating asset complements our investments in developing projects, such as Machang Bridge and Daegu-Busan Expressway,” he said.

Baekyang Tunnel Ltd is the concessionaire of a 2.8-km toll tunnel linking central Busan and its world-leading port to its northwest suburbs. The tunnel, which has been tolled since 2000, is a low-risk asset with underlying revenue substantially guaranteed by the Busan City Government under the 25-year Concession Agreement, ending in 2025.

Construction of the 1.7-km Machang Bridge will start next month and operations are expected to commence in mid 2008.   The bridge will provide a vital link across Masan Bay, alleviate severe congestion in the cities of Masan and Changwon, and be an alternative route for travel between Korea’s two southern provinces, Chollanam-do and Gyungsangnam-do.

“This is a landmark transaction for the Korean private infrastructure market. As a greenfield PPI road project with three firsts: non-recourse financing, a foreign contractor, and a strategic pure financial investor, Machang Bridge will be a model for future Korean PPI road projects,” Mr van Gelder said.

Established in January 2003, KRIF is Macquarie’s first infrastructure fund with a specific geographic mandate developed using funds sourced specifically from institutions in a foreign market.  In its first year, KRIF raised KRW630 billion ($A734 million), primarily from large Korean insurance companies and pension funds.

Within one year, KRIF has invested over half of its total investment commitments of KRW 630 billion.   Going forward, KRIF has secured additional exclusive positions to invest in a number of toll road assets in Korea with concession rights of 20 years or more.

KRIF is managed by Macquarie Shinhan Infrastructure Management Co. Ltd, a Korean asset management company jointly owned by Macquarie Bank and the Shinhan Financial Group, and is staffed by local and expatriate executives with expertise in infrastructure asset management.

Macquarie has more than $A12 billion in equity funds under management in infrastructure worldwide. Infrastructure investments managed by Macquarie include assets in transportation, water, telecommunications and energy sectors around the world, including Australia, Korea, UK, USA, Canada, Germany, Spain, Chile, Portugal and South Africa.

For further information, please contact:

Media Enquiries
Jane Rotsey
Public Affairs Manager
Tel: (61 2) 8232 5026
Email: jane.rotsey@macquarie.com

Nick van Gelder
KRIF Managing Director
Tel: (822) 3705 8507