U.S. renewable energy investment presents opportunities for Korean firms

Park Hee-jun, CEO of EIP Asset Management.

The U.S. government has set aside 481.5 trillion won ($362 billion) to promote investment in renewable energy facilities in a golden opportunity for South Korean companies, the head of a local asset management firm said.

In a recent interview with Meil Business Newspaper, Park Hee-jun, CEO of EIP Asset Management, asserted that the U.S. Inflation Reduction Act (IRA) should not be seen as a crisis but rather an opportunity for Korean businesses.

Last month, EIP Asset Management, under Park’s leadership, successfully secured a 600 billion won solar energy project in the United States in collaboration with SK ecoplant, Hyundai E&C, the Korea Overseas Infrastructure and Urban Development Corporation (KIND), and PIS Fund. This project signifies a substantial investment in renewable energy infrastructure in the country, with the potential for significant returns.

EIP will create a fund to invest in the project, and other partners will contribute capital. The project involves the construction of a solar power plant in Concho, Texas, which will cover an area of 11.73 million square meters. Upon completion, the plant will be able to power 240,000 four-person households annually.

The project has multiple revenue benefits, one being Korean enterprises will benefit from potential orders during the construction of the solar power plant and once the plant is completed, the power will be sold through long-term power purchase agreements (PPAs) with big tech companies in the United States.

“U.S. companies are focusing on securing PPAs for eco-friendly power to achieve their 100 percent renewable electricity (RE100) targets by 2025. Some of them focus on achieving RE100 across the supply chain by securing PPAs on behalf of their suppliers,” Park said.

Another revenue model for this project involves the Production Tax Credit (PTC) granted for renewable energy facilities. The U.S. previously offered PTC only for wind, geothermal, and landfill gas facilities, but a 10-year PTC program is now available for solar power facilities commencing construction before January 1, 2025 under the IRA.

“Given the maximum PTC one can receive when all conditions are met is 40 percent, we expect to receive up to 24 billion won worth of PTC from this 60 billion won project. Since the PTCs are marketable, we plan to sell them to major U.S. financial institutions,” Park said, adding “Our fund is targeting an annualized internal rate of return (IRR) in the upper 10 percent range.”

Park also emphasized that now is the opportune moment for Korean companies to showcase their renewable energy capabilities on the global stage.

“We need to seize the opportunity to enter the U.S. market within the first two years of IRA implementation. In the future, foreign competitors will also join the market quickly, and the United States could strengthen entry barriers to provide more opportunities for domestic companies.”