South Korea’s mutual aid associations and insurers are rushing to invest about 250 billion won ($223 million) in Britain’s High Speed 1 (HS1) that is expected to raise annual returns of up to 7 percent, according to multiple sources from the investment bank industry on Monday.

Their decision comes after a multi-national consortium including Korea’s biggest investor National Pension Service (NPS) was named last month as the preferred buyer for the sole high-speed rail line in Britain that connects London to the Channel Tunnel in which its equity value is worth about 3 billion pounds including debt.

The consortium led by Equitix Investment Management and InfraRed Capital Partners will buy the high-speed rail line from Canadian owners Ontario Teachers’ Pension Plan and Borealis Infrastructure. Under the advisory of InfraRed Capital Partners, NPS will pay 400 billion won for a 30 percent stake in HS1.

Following suit of NPS, Korea’s other major institutional investors including mutual aid associations, insurers, and mutual financial corporations are gathering funds to acquire stakes from the consortium in an investment of about 250 billion won in total on expectation for annual returns of between 6 and 7 percent.

According to sources, Hyundai Marine & Fire Insurance Co. and Hanwha General Insurance Co. plan to jointly invest 75 million pounds ($96.8 million) for interest from Equitix. Hana Financial Investment Co. is seeking to invest the remaining 100 million pounds with Korea Scientists & Engineers Mutual-aid Association, Nonghyup Mutual Finance, Heungkuk Fire & Marine Insurance Co., and Lotte Insurance Co. for ownership through InfraRed. The funds will be managed by KDB Infrastructure Investments Asset Management Co.

Korean institutional investors seeking high returns in a prolonged low interest rate environment have recently turned their eyes to overseas infrastructure investment.

HS1 is Britain’s only high-speed rail line that operates Eurostar connecting London and Paris. The sale includes operation and usage rights of the 109 kilometer railway line and four stations on the route.

Canada’s pension funds Ontario Teachers’ Pension Plan and Borealis Infrastructure jointly acquired a 30 year concession of HS1 from the British government in 2010 with a 50 percent ownership, each. The deal involved them returning back the asset to the British government after 2040 in the form of donation. The new owners would own the rights for only the remaining 23 years.

The Equitix and InfraRed consortium plans to complete the additional re-sale process by the end of next month.

By Kang Doo-soon and Song Gwang-sup

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