SEOUL, April 25 (Korea Bizwire) — SK Innovation Co., South Korea’s refinery-to-battery maker, is back in the driver’s seat to propel its electric vehicle battery business with stake sales and a planned listing of its subsidiary as its recent settlement with LG Energy Solution Ltd. cleared prolonged business uncertainties.
The subsidiary of the nation’s No. 3 conglomerate, SK Group, reached a 2 trillion-won (US$1.8 billion) settlement with its bigger home rival LG Energy Solution Ltd. to end a two-year legal battle for the EV battery business in the United States.
SK Innovation agreed to pay half in cash to LG Energy through 2022 and pay the rest in royalties starting in 2023.
The long-awaited compromise, which came in just before the April 11 deadline for the U.S. International Trade Commission’s 10-year import ban on SK Innovation, cleared the stumbling block for its $2.6 billion factory in Georgia, which was under construction to supply EV batteries to Ford Motor and Volkswagen starting next year.
“The settlement cleared uncertainty over (SK Innovation’s) battery business and its push in the U.S. market,” SK Innovation CEO Kim Jun said in an email to its employees after the agreement.
“We will step up construction of the Georgia plant and will expand investment and partnerships to target the rising EV market.”
SK Innovation, the world’s No. 6 EV battery supplier, plans to ramp up its battery production capacity globally to over 125 gigawatt hours by 2025, and in January, it announced a 1.3 trillion-won investment plan to expand its Hungary factory.
It also has factories in South Korea and China.
SK Innovation’s clients include Volkswagen and Ford in the U.S., Daimler in Europe, and Hyundai Motor and Kia in Asia.
Now, it is set to raise funds needed to expand its manufacturing capacity and pay the settlement money via an initial public offering (IPO) of its battery separator making unit and sales of stakes in petrochemical subsidiaries.
SK IE Technology Co. (SKIET), which makes separators that prevent lithium-ion batteries from exploding, is taking final steps to make its debut on the Seoul bourse next month, with its value estimated at up to 7.5 trillion won.
SK Innovation plans to sell 60 percent of its stake in the wholly owned subsidiary for the IPO, which is expected to raise up to 1.34 trillion won.
SKIET said it will use the proceeds from the IPO to expand production as the global market is expected to face a supply crunch beginning in 2023 in line with growing EV demand.
Market researcher IHS Markit predicted global unit sales of battery electric vehicles (BEV) and other EVs are expected to rise from 2.5 million in 2020 to 12.2 million in 2025 to represent compound annual growth of over 50 percent.
SKIET supplies battery separators to major EV makers, including Tesla and Volkswagen, taking up 26.5 percent of the global wet separator market, according to SNE Research.
It plans to invest 1.13 trillion won to build two more separator plants at an existing complex in Poland to step up its manufacturing capacity beyond South Korea and China.
“We will continue to expand the market share in the premium battery separator market, which has shown an explosive growth,” SKIET CEO Roh Jae-sok said during an IPO presentation Thursday.
SK Innovation, which has a broad portfolio from refinery and gas to battery and chemicals, is also pushing to sell its stakes in its petrochemical affiliates to propel its EV drive.
SK innovation said last month it will sell its entire stakes in two shale gas mines in the U.S. to Texas-based BenchMark Energy Corp., which was estimated at around several hundreds of million dollars. The exact amount of the deal was not disclosed.
In 2019, the company sold two Peruvian gas fields for 1.25 trillion won to reduce its reliance on traditional energy business.
As part of a further shift away from fossil fuels to cleaner energy sources, SK Innovation is nearing a deal to sell part of its stakes in SK Lubricants Co., the world’s largest premium lube oil marker, to a Korean private equity fund IMM Private Equity, a deal estimated at at least 1 trillion won.
Market watchers said SK Innovation’s realignment of its business toward the EV battery business comes at a right time when the EV demand is fast growing under toughening environmental regulations and rising government subsidies.
“Without spending on litigation costs and lobbying efforts in the U.S., SK Innovation can allocate more resources for its aggressive EV battery production plan,” Lee Dong-wook, an analyst at Kiwoom Securities, said.
The company shifted from an operating profit of 1.1 trillion won in 2019 to 2.6 trillion won of operating losses in 2020 on heavy losses from its refinery business hit by the COVID-19 pandemic but vowed to expand investment to increase production of EV batteries.
Last year, its battery business’s sales more than doubled to 1.6 trillion won, while booking 426.5 billion won of operating losses.