View of Pyeongtaek Oseong LNG Power Plant during night testing

This article was displayed on June 26, 2025, at 8:24 a.m. on the ChosunBiz MoneyMove site.

Competition among institutions aiming to secure a 5 trillion won liquefied natural gas (LNG) liquefaction deal from SK Innovation is fierce. Among securities companies, MERITZ Securities is being the most proactive in negotiations, while global private equity firms Kohlberg Kravis Roberts & Co. (KKR) and Brookfield are also continuing to negotiate terms with SK.

Contrary to what is widely known, MERITZ Securities did not propose a total return swap (TRS) method. The market believes that MERITZ likely suggested redeemable convertible preferred shares (RCPS) or price return swap (PRS) methods instead.

According to investment banking (IB) industry sources on the 26th, SK Innovation is pursuing asset liquefaction for its 5 trillion won LNG power generation project and is in discussions with financial investors (FIs).

The LNG liquefaction by SK Innovation aims to raise cash based on infrastructure assets such as five private power plants in Gwangyang, Paju, Yeoju, Hanam, and Wirye, as well as LNG terminals. The company aims to secure up to 5 trillion won by liquefying these assets.

The most actively participating securities company is MERITZ Securities. A high-ranking official familiar with this liquefaction deal stated, “It is correct that MERITZ Securities is negotiating with SK to support 5 trillion won,” and added, “Securities firms can offer lower interest rates compared to private equity funds that take money from limited partners (LPs), so the situation is relatively favorable.”

The official added, “However, I understand that they did not propose a TRS method.” TRS refers to a transaction where the agreement receives interest and capital returns derived from holding the underlying asset.

An IB industry official explained, “Since TRS must be recorded as an accounting liability, it is not an option for SK Innovation, which needs to reduce its debt,” adding, “The PRS method, which is not an accounting liability, is likely a better option.”

The industry believes there is a possibility that MERITZ Securities proposed investing through RCPS, which was also the method SK E&S used to receive investment from KKR in the past. SK E&S secured a total investment of 3.135 trillion won in RCPS from KKR over two rounds in 2021 and 2022. RCPS is structured to allow SK E&S to decide on redemption after five years, and is classified as accounting capital.

An industry official mentioned, “SK Innovation may have set a condition to guarantee a certain yield while attracting investments through RCPS, offering to give a portion of the institutional sector if unable to redeem.”

However, the industry believes there is no guarantee that MERITZ Securities will win this deal. Since a sum like 5 trillion won cannot be solely handled by a securities firm, it will have to resell it, which is expected to be difficult.

The presence of KKR and Brookfield, who have not yet withdrawn their investment intentions and remain at the negotiating table with SK, is also a factor that makes it impossible to be certain about the success of MERITZ's deal. An industry official stated, “Both private equity funds still have strong intentions, and by utilizing infrastructure funds, the expected yield can relatively decrease, so there is still a chance of success.”