Korea expected to play key role in future global growth of renewable technologies
By Anna J. Park
During the past decade, Hillhouse Investment, a major global private equity firm (PEF) with its assets under management (AUM) standing at $73.3 billion, has been strengthening investment in the climate technology sector, as the firm sees opportunities in the energy transition and transport industries.
The PEF has also increased its presence in the Korean market over the past years. Since its first investment in Korea in 2007, Hillhouse has made impactful investments in a range of successful Korean companies, including Woowa Bros, Kurly and Purgo Biologics, among others.
The firm made two key investments into Korean companies in last year. In June, it participated in the MBK Partners consortium to invest in SK On, followed by an acquisition of SK EcoPrime in November.
Aiming to listen to the PEF’s interests in the Korean market and its investing focus on the climate sector, the Korea Times held an email interview with Sean Carney, partner and head of its global investment team.
Prior to joining Hillhouse in 2017, Carney was a managing director at Warburg Pincus, where he spent some two decades across New York and London. Prior to Warburg Pincus, he worked at McKinsey and Goldman Sachs. He studied economics at Harvard College and received an MBA from Harvard Business School.
Hillhouse Investment was founded by Lei Zhang in 2005 in Singapore with initial seed capital from Yale University. It has grown to one of the world’s largest private alternative managers, with more than 500 portfolio companies headquartered in over 30 countries across East Asia, Southeast Asia, North America and Europe. Hillhouse operates global offices in New York, London, Hong Kong, Amsterdam, Sydney, Mumbai and Beijing.
Hillhouse Investment’s Partner and Head of Global Investment Sean Carney / Courtesy of Hillhouse Investment
Q. What sectors does Hillhouse mainly invest in, and how does the firm go about enhancing the value of its portfolio companies?
A. The firm is focused on investing in and partnering with high-quality businesses globally to build sustainable businesses for the long term. Hillhouse invests in companies across all equity stages, with a focus on health care, business services and industrials, consumer and energy transition.
We thrive on partnering with best-in-class management teams to integrate innovation and best practices across their operations. To support this, our portfolio development team and external consultants provide companies with on-site support and unique value creation strategies — from toolboxes across the digital sphere, talent services and strategic management services, to low-carbon transformation pathways.
Q. What are some of the firm’s global investments in the climate sector?
A. Hillhouse has been active in energy transition investments since 2016. Some of our first investments were in early electric vehicle (EV) producers, including original equipment manufacturers (OEM).
As the first generation of EVs took off, we identified emerging opportunities across the EV value chain, particularly in charging point operators (CPOs) and components, building our investments across both the public and private equity. In parallel, we also invested in the solar space, in large solar module makers and inverters.
The launch of Hillhouse’s climate fund in 2021 saw the inception of our climate strategy on a more formal basis. Since then, we have invested in OSW, a leading solar distributor in Australia with global operations in the Europe and the U.S., and more recently SK On, SK Group’s lithium battery subsidiary headquartered in Korea.
Q. What are the most important factors to consider when making investment decisions within the climate sector?
A. Thematically, we focus on greenhouse gas-intensive segments and industries where we believe our investment can be most impactful in tackling climate goals. Power generation is the biggest market opportunity in this regard, which can be addressed by solar energy and solutions.
The second-largest opportunity is transport, which further breaks down into the sub-sectors of passenger, commercial, marine and aviation. Emissions from passenger transport can be effectively mitigated through electric vehicles (EVs) and biofuels.
The marine transport sector is at the early stages of its energy transition journey given the challenges of replacing kerosene within the aviation segment. Sustainable air fuels (SAFs) are in development, but there are numerous hurdles to achieving transition at scale.
Q. Is there any specific sub-sector within the climate industry that you are particularly optimistic about?
A. While there are multiple segments with large total addressable markets, we are targeting transportation climate solutions, as we believe incremental advancements in this segment are very promising.
Q. What challenges and opportunities does Hillhouse perceive within the climate sector?
A. Challenges in the climate sector arise from scaling climate solutions to commercial scale, competing technologies, a need for mature talent, while commodity price fluctuations add additional complexities in the climate space.
But against this backdrop, we see compelling opportunities to invest in and scale technologies, innovations and component development in segments delivering outsized emissions reductions.
Promotional image from the official website of SK EcoPrime / Courtesy of SK EcoPrime
Q. How does the investment in SK EcoPrime fit into Hillhouse’s long-term climate strategy?
A. Our focus on decarbonization prioritizes power generation, transport, building, and industrials. The SK EcoPrime investment aligns with our long-term climate strategy of targeting high emitting pollutants in the transport sector.
SK EcoPrime is a leading manufacturer of biodiesel and biofuel oil in Korea, with feedstocks such as by-products of palm oil extraction and refining, animal fats and food waste oil, thereby generating cost-effective and low-carbon products.
Q. What opportunities and challenges does Hillhouse see for SK EcoPrime’s business?
A. Despite the robust demand profile and supply of renewable feedstock across the region, there is currently a dearth of sizeable renewable or greenfield companies in Asia, providing significant tailwinds to the company’s longer term growth trajectory.
Naturally, as with any biodiesel company, we expect there to be challenges related to meeting emission targets in an economic way.
Q. How does Hillhouse plan to enhance the value of SK EcoPrime?
A. It’s an exciting time to partner with the SK EcoPrime team and contribute to its long-term success as the biofuels market continues to evolve. Hillhouse intends to support SK EcoPrime by enhancing operational processes, exploring synergies with companies across our portfolio, and leveraging our network to facilitate growth opportunities.
Q. What is the firm’s longer-term outlook for investing in the climate sector specifically in Korea?
We are very focused on scaling proven technologies. We see Korea playing a key role in the future global growth of renewable technologies.
Q. How does Hillhouse assess investment opportunities in the Korean market, and what objectives does Hillhouse aim to achieve in this market?
A. Hillhouse continues to actively seek investment opportunities in specific segments across the Korean market. To date, Hillhouse’s focus has been on climate opportunities across electric vehicle battery (EVs) and its related value chain, as well as transportation more broadly.
Beyond our climate focus, Hillhouse has invested in select opportunities across the digital consumer and services space.
