The Export-Import Bank of Korea (www.koreaexim.go.kr, Chairman Lee Duk-hoon, “Korea Eximbank”) announced on June 23 that it is providing USD 380 million (a USD 210 million loan and a USD 170 million guarantee) in project financing to the Chile Kelar Gas-Fired Combined Cycle Power Plant Project, awarded by Australian mining company BHP Billiton to a consortium of Korea Southern Power and Samsung C&T.

- BHP Billiton is the world’s largest multinational mining company extracting and exporting various minerals and resources such as iron, copper, coal, aluminum, and oil to 26 countries worldwide.

This project is aimed at building a 517MW gas-fired combined-cycle power plant in Chile’s northern Antofagasta region to supply power to BHP Billiton’s copper mine located 200km southeast of the power plant. It would be the first private-owned power plant to be built by a Korean company.

Estimated to cost approximately USD 600 million, the plant is scheduled for completion in 2016.

The Kelar project holds particular significance for Korea as an ‘investment-development type project’ whereby Korean players are involved in every stage of the project from equity investment (Korea Southern Power, Samsung C&T) and construction (Samsung Engineering) to operation (Korea Southern Power).

Such projects offer higher operating margins and long-term dividends to Korean companies compared to conventional projects whose prices have been driven down by overheated competition.

The Chilean power market has been difficult to access for Korean companies due to the oligopoly of US and Spanish energy firms.

In this context, Korea Eximbank is credited to have decisively assisted the entry of Korean firms into the Latin American power market by providing competitive financing and information on how to win contracts such as power purchase agreements.

A Korea Eximbank official explained that the bank “expressed its intent to finance the deal since 2012, at the initial stage of the project, and offered a 17-year repayment term. International commercial banks such as Natixis and SMBC subsequently joined in, leading to the successful bid by Korean companies to develop and operate the project.”