KDB Spearheads Post-Crisis Green Growth Drive
By Kim Jae-kyoung
The Korea Development Bank (KDB) has played a pivotal role in spearheading the nation's industrialization and supporting the economic rebound from the 1997-1998 financial crisis.
In particular, it successfully overhauled the troubled corporate sector by leveraging the expertise it has accumulated over decades of managing insolvent companies, facilitating the government-initiated restructuring drive.
One year after the global financial crisis, the state-run lender is taking the lead in the green drive in the local financial industry in line with the government's vision to pursue "low carbon, green growth."
It is now seeking to help Asia's fourth-largest economy weather the ongoing economic storm and get the upper hand in the post-financial crisis era by developing a new growth engine in green finance.
The bank believes that it can help not only boost the economy but upgrade the financial industry by supporting environment-friendly industries.
"The green growth industry is a promising industry in the long term but it is still at an infant stage and it takes a long time to collect invested capital. In addition, its return is deemed not very high compared to its riskiness,'' a KDB executive said.
"Against this backdrop, the KDB, as a policy lender, seeks to play a leading role in supporting green industries in order to help overcome the economic crisis and secure a long-term, sustainable growth engine,'' he added. "In particular, the latest economic turmoil discouraged commercial lenders to actively support green industries, which has affected firms in the environmental and renewable energy fields."
The lender's speedy move toward green finance came after President Lee Myung-bak unveiled his vision to transform the country into a green economic power in August 2008.
President Lee Myung-bak said the government will promote ``low carbon and green growth'' as the nation's new vision, abandoning its 60-year-long manufacturing-based and export-oriented approach. ``Green growth is a new national development paradigm that nurtures new engines and creates jobs with green technology and clean energy,'' he added.
To support eco-friendly businesses, the KDB launched a taskforce for investments in promising technologies and business opportunities in the green sector and laid aside 1 trillion won that will be provided to green businesses in various forms, such as loans, project financing and private equity investment.
For example, the KDB provided a total of 510 billion won in loans to support the construction of plants for Neosemitech, which manufactures the parts needed for solar batteries.
In the project financing sector, the lender has financed four new major renewable energy projects, including Hyundai Greenpower`s construction of a 400-megawatt power-generating facility using by-product gases and the establishment of a wind power plant on Mt. Taegi, Gangwon Province. It will also finance POSCO Power's construction of a 284-megawatt thermal power plant.
Abroad, the KDB has joined forces with a local environmental consulting firm, Ecofrontier, for a project to build a heat-and-power facility using biomass such as palm oil residues in Malaysia`s Sabah state. The KDB has secured Korea Midland Power as a financial investor for the project worth more than $100 million and is set to seal the funding contract later this year.
In the future, the lender plans to form the KDB Green Future Fund, which will be invested in the development of renewable energy, such as solar energy, wind power, bio mass, hybrid transportation and carbon emission trading.
"The KDB Green Future Fund is a private equity fund designed to support technology development and industrialization in the area of new growth engines,'' another KDB official said.
"We plan to invest more than 60 percent of the fund in renewable energy development."
In addition, the lender is also seeking to enter the carbon credit market. To that end, it plans to actively participate in trading Certified Emission Reductions (CERs), which are carbon credits issued by the Clean Development Mechanism (CDM) Executive Board for emission reductions.
CDM refers to an arrangement under the Kyoto Protocol allowing industrialized countries with a greenhouse gas reduction commitment to invest in projects that reduce emissions in developing countries as an alternative to more expensive emission reductions in their own countries