The 23.4km double-track project will serve both metro and freight traffic and is part of a system that will provide a northern transport semi-circle around Seoul to complement a similar southern link.

The BTL is structured using special purpose concessionaire E-Rail, under a 20-year concession awarded by the Ministry of Land & Maritime Affairs. The scheme is the biggest infrastructure project in Korea since the start of the financial crisis in 2008 and the first Korean project deal to combine an ancillary real estate development – residential and retail complexes in the vicinity of the railway stations – with an infrastructure project, thus topping up passenger and freight cashflows with rents.

Macquarie Capital Advisers is financial adviser to the sponsor group, which, in addi­tion to Daewoo, includes Bando Engineering & Construction, Doohan Engineering & Construction, KB Sosa-Wonsi Rail Project Trust Fund, KCC Engineering, Sampyo, TaeYoung and Wonha Construction.

The first part of the Sosa-Wonsi project will run south from the existing Sosa station in Bucheon, cross Siheung, and end in Wonsi New Port in Ansan. The section will have transfer stations with Seoul Subway Line 1 at its start in Sosa, with the Sin Ansan Line at Siheung City Hall, and with Seoul Subway Line 4 in Ansan. The project includes 12 stations in total.

The second phase – for which contracts have yet to be awarded – is the Sosa-Daegkok section, which would extend the line north from Sosa through Bucheon, Gimpo Airport and into Ilsan in Goyang City. The line will have transfers for Line 7 at Dongarae Station, Lines 5 and 9 at at Gimpoa Airport and Line 3 and the Gyeongui Line at Daegok Station.

There are also plans to upgrade the single-track non-electric Gyowae Line, which has no passenger service. The combination of all sections would provide a northern semicircle of metro services mirroring the southern semicircle formed by the Bundang Line and the Suin Line.

The financing comprises W152.5 billion of equity and W1.541 trillion of debt. The debt is split between W1.435 trillion of senior debt, a W106.8 billion subordinated tranche, a 20-year W40 billion stand­by facility with a bullet repayment, and a W70 billion loan to the real estate ancillary business associated with the SPV. Financing for the ancillary business was sole arranged and provided by Korea De­vel­opment Bank. (KDB) as a five-year bullet.

The 25-year senior loan is provided by National Pension Service of Korea (W600 billion), Korea Life Insurance (W335 billion), Kyobo Life Insurance (W300 billion), Korea Finance Corporation (W200 billion) and Korea De­velopment Bank on a club basis. KDB also provided the 20-year W40 billion standby facility.

The margin on the senior loan is 118bp over five-year Korea Treasury Bonds (KTB). The margin on the 25-year subordinated debt is fixed at 850bp per year. And the margin on the ancillary loan is 118bp over one-year KTB. KB Sosa-Wonsi Trust Fund contributed 90% of total equity and provided 100% of the subordinated debt in the project.

The project has had a difficult ride from award to signing. Daewoo was appointed preferred bidder in 2008 and construction was originally scheduled to begin in 2009. The scheme was then put on hold because investors were reluctant to commit. Now signed, construction is expected to start this year. The contractor has seven years for the design and build phase.

The project is a key part of Korea’s plan, announced last year, to reduce travel times between Seoul and 95% of the country to less than two hours by 2020. As a consequence, Sosa-Wonsi and other parts of the overall project are to be upgraded to 230km/h lines. 

Sosa-Wonsi
Status: Signed 27 December 2010
Size: W1.652 trillion
Location: Korea
Description: 23.4km double-track metro and freight project
Sponsors: Daewoo Engineering & Construction, Bando Engineering & Construction, Doohan Engineering & Construction, KB Sosa-Wonsi Rail Project Trust Fund, KCC Engineering, Sampyo, TaeYoung, Wonha Construction
Financial adviser: Macquarie Capital Advisers
Lead arrangers: National Pension Service of Korea, Korea Life Insurance, Kyobo Life Insurance, Korea Finance Corporation, Korea Development Bank
Sponsor legal counsel: Lee & Ko
Lender legal counsel: Kim & Chang