Green Day 67
The author is an analyst for NH Investment & Securities. She can be reached at eunsang.lee@nhqv.com -- Ed.
System overhauls and law amendments led by MOTIE are to invigorate the securitization of assets within industrial complexes. Fixed assets within industrial complexes (eg, water treatment centers) are likely to be actively securitized down the road.
Incorporation of SK Hynix’s Icheon Waste Water Treatment Center into SK REIT
On Jul 27, SK REIT decided to incorporate SK Hynix’s Icheon Waste Water Treatment Center via the establishment of a subsidiary REIT. The center is valued at W1.12tn, with a cap rate of 6.2%. After selling the water treatment center, SK Hynix plans to lease the facility back again.
Water treatment centers are essential assets for manufacturers to treat, recycle, and reuse wastewater. Continued maintenance and repair are needed to raise the quality of discharged water and water reuse rates.
In 2022, SEC and SK Hynix’s water intake came to 131mn tons and 78mn tons, respectively. Their water discharge-to-water intake ratios were 79% and 78%, respectively. And, their respective water reuse-to-water intake ratios stood at 66% and 44%. These figures indicate that they treat and reuse a large portion of their water intake volume. Considering SEC and SK Hynix’s annual water intake volume, their waste water treatment facilities are estimated to be worth a respective W4.7tn and W1.7tn (excluding Icheon Campus).
Securitization of fixed assets to be invigorated
MOTIE’s major industrial policy direction for 2H23, announced on Jul 11, shows that it will carry out system overhauls to enable assets within industrial complexes to be sold and leased. Details are to be announced in August, with law amendments to be made in September.
The sum of SEC and SK Hynix's facility investment in 2024 is estimated at W72tn. SEC is expanding production lines in Pyeongtaek and plans to build a foundry in Yongin. SK Hynix intends to invest in a US packaging plant and DRAM facilities. In addition, according to SEC’s environmental management strategy announced in Sep 2022, it will invest more than W7tn by 2030 in conserving water resources and minimizing pollutants.
As the investment in related environmental facilities increases along with capacity expansion in semiconductors, companies need to secure funds. If the bill on securitization of industrial facilities is passed, the securitization of fixed assets, including water treatment centers, will be actively discussed.