Nam Hyun-woo has worked as a staff writer at The Korea Times since 2013, mostly covering business and politics. He currently belongs to the Business Desk where he covers topics such as emerging tech, AI, ICT and Korea's chaebol community. Prior to joining the team, he was the paper's correspondent for the presidential office of Korea during the Yoon Suk Yeol and Moon Jae-in administrations.
LG Chem spins off battery biz, names it LG Energy Solution
Seen above is LG Chem's headquarters on Yeouido, Seoul, Sept. 17. LG Chem said it will separate its battery business into a new company. Yonhap
By Nam Hyun-woo
By Nam Hyun-woo
LG Chem said Thursday it will spin off its rechargeable battery business Dec. 1, under the new name LG Energy Solution.
The move comes after LG Chem's battery business reached its break-even point in the second quarter, as well as becoming the world No. 1 electric vehicle (EV) battery supplier for the January to July period. Following the spinoff, the new company is expected to go public to raise funds that will finance future investments including plant expansion and joint ventures.
According to LG Chem, after getting approval at a shareholders meeting Oct. 30, LG Energy Solution will begin operations Dec. 1, although LG Chem will initially still own 100 percent of the spinoff.
LG Energy Solution seeks to achieve 30 trillion won ($25.5 billion) or more in sales by 2024, up from 13 trillion won estimated for this year. The company will have 100 billion won as paid-in capital, but has not yet applied for an initial public offering (IPO), according to a regulatory filing by LG Chem.
“The company believes this is the time to separate the business as the global battery industry is rapidly taking off, and structural benefits are being materialized in the EV battery business,” LG Chem said in a statement. “After separating the businesses, each company will be able to fully focus on its expertise and improve efficiency, resulting in enhanced shareholder value.”
LG Chem is strengthening its presence in the global EV battery market. According to market tracker SNE Research, its market share stood at 25.1 percent from January to July, outpacing CATL with 12.7 percent and Panasonic with 10.1 percent.
Based on solid demand, LG Chem's order backlog amounted to 150 trillion won at the end of last year, up from 42 trillion won in 2017.
Though the company was non-committal on whether LG Energy Solution would pursue an IPO, the market expects the new company will debut on the bourse due to the need to finance its expansion.
LG Chem said it decided to spin off the firm because it saw “the necessity to secure a large amount of funding for investments at a time when it spends approximately 3 trillion won on facilities each year.”
So far, the company has been financing its battery business with profits coming from its petrochemical operations. However, as batteries require greater investment, concerns have been raised that these profits were not enough to support the money-consuming business.
LG Chem investors, however, have not welcomed the decision, as they fear the company may lose its growth driver. Some posted an online petition on the Cheong Wa Dae, saying, “LG Chem without its battery business is nothing more than a plastic bottle maker.” LG Chem shares slumped by 6.11 percent to end at 42,000 won.
With LG Chem officially announcing the battery division's spinoff, observers anticipate that LG Group and Hyundai Motor Group will team up to set up an EV battery joint venture in Indonesia.
Sources said that Hyundai and LG have signed deals with the local authorities there on building manufacturing plants.
“The Indonesian authorities have already offered support regarding taxes, electricity supply and the plant site to LG and Hyundai Motor,” said a senior industry official.
LG Group and Hyundai Motor Group have already partnered on EV batteries in Korea. In 2010, Hyundai Mobis and LG Chem set up a 51-49 joint venture, HL Green Power, which builds battery packs from LG Chem's components to supply to Hyundai Mobis.