IMM Investment Corp. is seeking to complete its acquisition of a 49 percent stake in GS Power Co. by next month in a win-win deal that can add dividend income for the private equity fund and raise capital for upgrades in the country’s second-largest cogeneration power plant facilities.

IMM Investment hopes to sign the contract for the stake minus management right in December, according to investment bank industry sources on Tuesday. The Seoul-based PEF reportedly has agreed to pay 1 trillion won ($841 million) for the near half stake in GS Power by putting its corporate value at 2 trillion won.

IMM Investment will finance the stake purchase through funds raised from its blind pool Petra 8th Private Equity Fund and a loan from Shinhan Investment Corp.

The PEF has been lured by GS Power`s handsome dividend instead of the potential of making money from the company possibly going public.

GS Power’s dividend payout ratio has hovered around 70 percent in the recent three years.

The company generated 181.0 billion won in operating profit in 2020, up 10.7 percent on year, although sales fell 8.6 percent to 733.6 billion won. Net profit rose slightly to 116.5 billion won from 104.5 billion won over the same period.

GS Power has a very stable profit structure but a weak growth potential, which makes IPO very unlikely, noted an unnamed analyst.

IMM Investment will be GS Power’s second financial investor. KB Kookmin Bank in a consortium made 413.0 billion won worth stake investment in GS Power in 2012.

GS Energy Corp., the parent of GS Power, bought back the stake from the KB Kookmin Bank consortium at 710 billion won last year to cement its control over the cogeneration power plant unit.

Analysts suspect GS Energy is offering the stake again to raise funds for upgrades in aging facilities. As of the third quarter, GS Power held only about 1 billion won in cash and cashable assets.

GS Power was previously owned by state-run Korea Electric Power Corp. The state utility firm sold cogeneration power plants and some of Korea District Heating Corp.’s facilities to GS Group in 2000 under the government’s privatization policy for state-run companies.

GS Power currently is the second-largest cogeneration power plant operator after Korea District Heating in Anyang and Buchoen, cities southeast of Seoul with factory complexes and large residential areas.

A cogeneration power plant, which is also known as a combined heat and power plant, produces heat and electricity by burning fuel.

By Kang Woo-seok and Cho Jeehyun

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