Darby seeks to tap NPS, Eximbank for Colombian infrastructure investment

Darby Overseas Investments is seeking to tap the National Pension Service, Korea’s pension fund, and the Export-Import Bank of Korea as its potential institutional investors for infrastructure in Colombia.

The U.S. private equity is considering setting up its largest fund yet to invest in “segments” of Colombia’s $20 billion road project, which will be announced next week, Darby CEO Richard Frank told The Korea Herald.

Darby has normally managed funds sized at around $300 million, and invests in infrastructure and related assets for a period of 10 years. It usually exits its investments via three options such as trade sale to strategic buyers, public listing, or management repurchase or buyout.

Infrastructure is an attractive investment especially to pension funds as it brings in a steady long-term flow of capital.

Frank said that Colombia’s infrastructure space offers immense opportunity for Korea and its construction companies such as Hyundai Engineering & Construction and Daewoo Engineering & Construction.

Colombia has had strong relations with Korea. Colombia helped South Korea in the Korean War, and the two are free trade partners.

Colombia is the third-largest economy in Latin America after Brazil and Mexico, with foreign exchange reserves of over $30 billion and well-established foreign investment policies. Colombia has also never defaulted on its debt, Frank said.

Korea would be seen as a favorable investor and partner for Colombia, which seeks to boost its infrastructure, a key part of economic growth.

Frank said Darby would like to serve as the “bridge” between the two sides by providing its long-standing regional and financial expertise to Korean investors.

“We would like to help link Colombia with Korea,” he said.

Darby, part of Franklin Templeton Investments, a global asset manager, has invested in 110 companies and infrastructure assets around the world over the last 17 years, with an average rate of return of 15-25 percent for its investors.

In Colombia, the private equity achieved a return of 26 percent, or 7.3 times the initial investment in an energy resource developer.

It has sold 55 companies and assets in its investment portfolio.

Latin American economies usually offer concessions to private companies to build and operate infrastructure assets such as roads as they can more effectively manage assets than the public sector.

The region also has a minimum revenue guarantee system, which has increasingly become a public issue following a dispute between Macquarie and Korean regional governments.

Frank, however, said that an MRG system alone does not create a “right” balance for infrastructure financing, and that countries should promote a sound public-private partnership programs that can encourage the private sector to operate for the public interest.

By Park Hyong-ki (hkp@heraldcorp.com)