KfW Ipex and Nord LB have come together to lend €194mn to Posco Energy, a Korean company.

The loan will be used to expand a combined-cycle power plant using German technology. It is part of a total project cost of €1bn, the rest of which will come from a bond issue and Posco’s own funds.

The German government has issued an export credit guarantee for the loan, which has a 14-year tenor.

The expansion of the Incheon-based plant will consist of the construction of three new ‘power islands’, generating a total of 1,260MW of power. Siemens will provide gas and steam turbines for the expansion.

“Our financing enables us to support German advanced technology exports and therefore strengthen Germany as a production location. We are also helping to reduce the impact on the environment at the same time,” says Markus Scheer, of KfW Ipex’s management board.

South Korea entered into a free trade agreement with the EU in 2011 and Germany is by far the biggest beneficiary. Germany’s exports to Korea rose almost €1bn year-on-year between January and June 2013 – 38% of the EU’s total exports to Korea. Its bilateral trade surplus of €3.4bn dwarfs that of the second-biggest, the UK on €1bn.