This photo provided by SK E&S Co. shows the Barossa-Caldita gas field that SK E&S is currently developing with the Australian energy company Santos in Australia. (Yonhap)
SEOUL, July 17 (Korea Bizwire) – The merger of SK Innovation Co. with its affiliate SK E&S Co. is expected to create an energy giant with 106 trillion won (US$75.6 billion) in assets, marking the first step in SK Group’s restructuring as the group seeks to cut the number of its affiliates to focus on its key businesses.
SK Innovation and SK E&S held separate board meetings and approved the merger plan. Following final approval at an emergency shareholders’ meeting next month, the newly formed entity will become the largest energy company in South Korea.
Under the merger plan, SK Innovation and SK E&S will combine horizontally, maintaining their existing business portfolios, organizations and workforces. This approach aims to ensure stable growth while keeping the management and operations of the two companies independent.
Founded in 1999, SK E&S operates in various energy sectors, including liquefied natural gas (LNG), hydrogen, and renewable energy. Last year, it reported sales of 11.2 trillion won and an operating income of 1.3 trillion won.
Ulsan Complex operated by SK Innovation
SK E&S will continue to leverage its competitive LNG value chain while maximizing synergies with SK Innovation’s expertise in oil refining, EV batteries and petrochemicals.
SK Innovation, a subholding company of SK Group in the energy sector, oversees nine subsidiaries, including key EV battery maker SK On Co., SK Energy Co., and SK Geo Centric Co.
The merger is expected to enhance profitability across the energy value chain, encompassing oil, LNG, renewable energy, batteries and hydrogen.
Above all, the SK Innovation-SK E&S merger is a pivotal part of SK Group’s reorganization strategy, aimed at streamlining its governance structure and improving the financial stability of SK On, which has faced financial challenges for 10 consecutive quarters.
SK Group headquarters in Seoul
Following this merger, SK Group, South Korea’s second-largest conglomerate by assets after Samsung Group, plans to accelerate further projects to reduce its 219 affiliates through mergers and stock sales.
At a high-level meeting last month, SK Group Chairman Chey Tae-won emphasized the need for “preemptive and fundamental change” to navigate the new era of transition, particularly in green, chemical and bio businesses.
Amid declining demand in the electric vehicle and petrochemical markets, SK Innovation is exploring ways to improve SK On’s profitability, including integrating the EV battery maker with other energy-related affiliates, such as SK Trading International Co. and energy storage firm SK Enterm.
Insiders also pointed out that SK Innovation is considering selling SK IE Technology Co., an EV battery component supplier, to ease SK On’s financial difficulties.
Additionally, SK Group is seeking more mergers among its subsidiaries in order to finance its AI semiconductor business.
SK ecoplant Co. is expected to integrate SK Materials Airplus Inc., a manufacturer of industrial and medical gases, and Essencore, a producer of DRAM modules, USBs, and MicroSD cards from chips supplied by SK hynix Inc.
Last month, SK Group announced plans to secure 80 trillion won by 2026 for investments primarily in AI and semiconductors to stay aligned with global trends.
(Yonhap)
