A government-backed private equity fund to invest in overseas plant-building projects, led by South Korean companies, will invite major sovereign funds in the Middle East as investors.

The fund, created by the Ministry of Knowledge Economy, selected Macquarie Infrastructure and Real Assets as the fund operator on Thursday and will start courting investors during the first half of next year.

“The plant fund, the first of its kind, plans to attract $500 million not only from local investors but also overseas funds, in particular, sovereign funds in the Middle East, as demand for Korean plant builders is rising in the region,” a senior ministry official said.

He added that a couple of major sovereign funds in the Middle East expressed their interest in the fund during the presentation in the Middle East this year.

In Korea, such state-controlled pensions and funds as the National Pension Fund and Korea Post are expected to join the plant fund as investors.

If the capital-raising is closed as planned, the fund is likely to take over a stake in plant-building projects of local construction and engineering companies overseas from the second half of next year, the official said.

Targeted projects and regions are power generation, desalination, petrochemical plant-building projects in the Middle East, North Africa and East Asia.

In a long term, the ministry will create more similar and bigger plant funds based on the results of the first fund to support the nation’s globally competitive plant industry to win more projects without difficulties in financing.

Armed with affluent track records, technology and human capital, local plant builders, including construction and engineering companies, power generation firms and heavy industries companies, have tapped the overseas plant market.

According to the ministry, the overseas plants orders reached $65 billion in 2011 and have grown 23 percent per year on average for the past decade.

Some local builders had to give up joining a bid due to the lack of a financing fund amid rising demand for overseas plant construction. To solve the issue, the government outlined the private equity fund creation plan at a weekly economic policymakers meeting last March.

“The plant fund, aimed to support the plant industry, will closely communicate with industry players before making an investment decision,’’ the ministry official said.

By Seo Jee-yeon  (jyseo@heraldcorp.com)