KKR in Feud Over Control of South Korea’s Largest Solar Plant

Key Takeaways

Sector: Energy Infrastructure & Renewables.
Geography: South Korea.

Analysis

Global private equity firm KKR & Co. Inc. is locked in a heated dispute with local shareholders of TACE Inc., a South Korean solar power plant operator, over control of one of the country’s largest renewable energy projects. The conflict has emerged as shareholders seek to regain control of the company through refinancing, challenging KKR’s and Lantern Advisory & Investments' financial interest in the business.

In 2021, KKR and Lantern A&I acquired TACE Inc. for 10 billion won (approximately $7.3 million) and invested an additional 190 billion won ($139 million) through subordinated notes and convertible bonds (CBs). The investment was aimed at developing a massive solar energy facility on Anmyeondo Island, located about 180 kilometers (112 miles) southwest of Seoul.

Original shareholders Lee Jae-ho, Kim Sang-kwon, and Hwang Tae-hoon are now attempting to raise 500 billion won ($366 million) via Hana Securities to repay bonds and remove KKR and Lantern from the investment. They are also preparing to repay 296 billion won ($216 million) in senior loans to solidify their control.

South Korean law mandates government approval for majority shareholder changes in energy projects, which cannot be granted before commercial operations begin. Though the plant began operating in September 2023, approval was delayed due to a scandal involving Lantern’s former CEO, Lee Seung-hoon, who faced embezzlement charges.

KKR later received approval to convert its CBs to shares, but Lantern’s application was denied. The firm has vowed to sever all ties with Lee and reapply. Meanwhile, TACE’s financial performance has lagged, with efficiency levels still under target after nearly two years of operation.

The shareholders claim the stock purchase agreement is void due to failure in securing approvals. KKR and Lantern argue the shareholders are exploiting the delay to maintain management control after the plant's value rose post-launch.

KKR and Lantern hold preemptive consent rights over key decisions, including early debt repayment, making the refinancing complex. Kim Sang-kwon insists that early bond repayment is legally viable, and the refinancing continues under Hana Securities despite objections from the financial investors.