SK Innovation to spin off EV battery business

SK Innovation CEO Kim Jun speaks during a press conference at a hotel in Seoul, Thursday. Courtesy of SK Innovation

By Baek Byung-yeul

SK Innovation officially confirmed Thursday that it will spin off its wholly-owned electric vehicle (EV) battery business unit to raise cash and seek an initial public offering (IPO).

“To maximize our portfolio value, we are considering separating the battery business unit,” the company's CEO Kim Jun said during an online press conference. This was the first time that the energy, chemical and battery affiliate of SK Group officially responded to market enquiries about the future of its battery unit.

The CEO said SKI is considering seeking an IPO as the company needs to secure an enormous amount of “resources” to grow its battery unit. But he added the company has not decided how to spin off the battery unit from the company.

When asked about when it will spin off the battery unit, Kim said, “the timing of the separation of the battery unit is something to consider in conjunction with an IPO.”

SKI said it was hoping to become one of the leading electric car battery makers, investing 18 trillion won ($15.89 billion) over the next five years.

Currently, the company's annual battery production capacity is at 40 gigawatt-hour (GWh), but the company plans to improve the capacity to 200 GWh in 2025 and 500 GWh in 2030. SKI added it has secured over 1 terawatt-hour worth of battery orders, estimated at 130 trillion won.

SK Innovation's battery business CEO Ji Dong-seob shares the company's business plan during a press conference at a hotel in Seoul, Thursday. Courtesy of SK Innovation

Ji Dong-seob, head of SK's battery business, said the company requires a massive amount of cash to meet the fast-increasing demand for electric car batteries.

“We need a lot of investments because of the rapid expansion of the battery business. We have invested between 2 trillion won to 3 trillion won in the battery business every year and we need to spin off the battery business to not to miss the timing,” Ji said.

But the announcements failed to impress investors as the share price of the company plummeted. The company's stock plunged by 8.8 percent to close at 269,500 won, Thursday, according to the Korea Exchange (KRX), the country's main bourse operator.

Investors showed a chilly reaction to the announcement as they were reminded of the previous example of LG Chem, which announced the implementation of a spin-off option when the company decided to separate its battery business to launch a new entity named LG Energy Solution (LGES) in September 2020.

Investors, especially retail investors who hold a small amount of LG Chem stocks, strongly opposed the announcement as they were not able to hold the same portion of LGES shares.