SK Innovation could spin off battery business

Industry

Published: 01 Jul. 2021, 17:49

SK Innovation could spin off battery business

SK Innovation President and CEO Kim Jun speaks during a press and investor event held Thursday at the Conrad Seoul Hotel in Yeouido, western Seoul. [SK INNOVATION]

SK Innovation said Thursday it is considering spinning off its battery business and listing it in the U.S.

“In order to develop SK Innovation’s battery business, a lot of resources are needed and spinning off is considered one of the options to achieve that,” said Kim Jun, CEO and president of SK Innovation, in a media and investor event held Thursday.

“In terms of an initial public offering, the best timing would be when the company is able get the right valuation from the market," Kim continued. "We are considering a Nasdaq listing or dual listing on Nasdaq and where the company's business is based as possible options."

Kim's remarks dragged SK Innovation's share price down to 269,500 won, an 8.8 percent drop from the previous trading day.

SK Innovation, an oil refiner and battery maker, declared Thursday it would change the company’s business identity "from carbon to green." It said it would increase its so-called green assets -- assets related to eco-friendly businesses such as EV batteries -- from a current 30 percent of the total to 70 percent by 2025.

SK Innovation was founded as an oil refining company in 1962.

The company said it would invest 30 trillion won over the next five years to achieve those objectives, 18 trillion won of which will be dedicated to the battery business.

SK Innovation said it has an electric vehicle (EV) battery order backlog worth 1 terawatt-hours, which roughly translates to 130 trillion won ($115 billion). That is significantly more than the 60 gigawatt-hour EV battery backlog SK Innovation had in 2017.

“We expect to be one of the global top three players in terms of monthly sales by the end of next year,” said Ji Dong-seop, chief of SK Innovation’s battery business during the event.

SK Innovation is currently the world’s sixth biggest supplier of EV batteries, according to market tracker SNE Research. China’s CATL was the biggest as of May, followed by Korea’s LG Energy Solution and Japan’s Panasonic.

“The production capacity that currently stands at 40 gigawatt-hour (GWh) will expand to 85 GWh by 2023 and 200 GWh by 2025 and more than 500 GWh by 2030,” Ji said.

“Ebitda margins [earnings before interest, tax, depreciation and amortization] for the battery business will turn to profit this year and reach 1 trillion won by 2023 and 2.5 trillion won by 2025.”

Ji said the sooner the spinoff happens, the better for the battery business to grow.

"The battery business is expanding at a fast pace and we need a lot of investment," he said. "We have been making 2 to 3 trillion won in investments every year recently. In order to not miss the investment timing, we want the spinoff to happen fast."

Expanding battery materials production and recycling used batteries will also contribute to making the company’s business portfolio greener.

Through SK ie technology, a lithium-ion battery separator (LiBS) manufacturing company that went public in May, SK Innovation said it will expand LiBS production capacity from the current 1.4-million square meters to 2.1-million square meters by 2023.

It will also continue to recycle valuable metals from used batteries, especially the lithium hydroxide, in order to reduce emissions of carbon. Recycling lithium hydroxide from used batteries reduces emissions of carbon by 40 to 70 percent compared to using new materials that have been mined in the traditional method.

SK Global Chemical, a wholly owned subsidiary of SK Innovation, also said Thursday it will implement a new business model that produces oil from waste plastic.

“SK Innovation’s ultimate goal is to leave no footprint behind related to fossil fuel,” CEO Kim said.

"We will ultimately reach a virtuous cycle where we recycle 100 percent of plastic produced by SK Global Chemical."

BY JIN EUN-SOO [jin.eunsoo@joongang.co.kr]