■ Board of Directors (BOD) decided to spin off the battery business and E&P business for green growth and increasing enterprise value
– The approval is to take place in the extraordinary general meeting on September 16th, companies will officially be set up starting October 1st
■ SK Innovation to raise the enterprise value as “a holding company that develops the green portfolio”
■ Chairman of the Board Kim Jong-hoon said SK Innovation will “focus on increasing corporate value by enhancing expertise in each business”
■ CEO of SK Innovation Kim Jun: to “accelerate battery business growth through the spin-off”, and to “complete the green growth strategy”
SK Innovation has decided to spin off the battery and exploration and production (E&P) business as independent companies, creating an autonomous management system for each.
| Pushing ahead with the green-centered growth and increasing business/enterprise value
SK Innovation held the board of directors (BOD) meeting led by Chairman Kim Jong-hoon on the 3rd and decided to spin off its battery and E&P businesses, after announcing that these two businesses have been fully recognized for their growth potential and competitiveness. The spin-off decision was based on the necessity to enhance SK innovation’s corporate value. Following this, the extraordinary general meeting will take place for approval of the matter on September 16th, and the new tentatively named companies “SK Battery Co., Ltd.” and “SK E&P Co., Ltd.” will officially come to existence starting October 1st.
According to this decision, SK Innovation will be a holding company that plays the role of the “Green Portfolio Designer & Developer” and puts greater emphasis on the improvement of the enterprise value.
In order to do so, the company will center its focus on the green businesses and utilize various means such as R&D, business development, M&A, and others to discover the second and third battery and lithium-ion battery separator (LiBS) businesses and create new values. It is also planning to grow the BMR (Battery Metal Recycle) business, which is currently being promoted, in full swing. This is what CEO of SK Innovation Kim Jun already announced during the SK Innovation’s Story Day event held on July 1st.
The upcoming spin-off of two businesses will take place in the form of simple division and split-off, wherein SK Innovation will own the entire issued stocks of the new companies. The assets and liabilities belonging to the two businesses will be transferred to the newly established company, respectively.
The SK Battery Co., Ltd. (tentative name) will be responsible for the medium-to-large-sized EV batteries, Battery as a Service (BaaS), and Energy Storage System (ESS). The SK E&P Co., Ltd. (tentative name) will be in charge of oil exploration and production business, and the Carbon Capture & Storage (CCS) business.
SK Innovation’s Chairman of the Board Kim Jong-hoon said, “The upcoming spin-off will allow the businesses to create a management system that fits their business characteristics, and the decision was made to raise the overall expertise and competitiveness.” “Attracting investment and increasing business value in each business will provide more flexibility to quickly and comprehensively respond to various management environments,” Chairman Kim added.
He gave further explanation regarding the necessity of the spin-off, that “SK Innovation will accelerate the Carbon to Green growth strategy that we are strongly promoting, and intensively increase our corporate value.”
| Battery business spin-off, a turning point for global competitiveness
SK Innovation said the spin-off will be a turning point for securing global competitiveness in the battery business. It was announced in SK Innovation’s Story Day event on July 1st that the battery business aims to grow into a global top player based on its battery order backlogs of “1 Terawatt + α.”
Currently, the company holds an annual battery production capacity of 40GWh, producing from various countries, including South Korea, the United States, China, Hungary. The company revealed its plan to quickly expand its production capacity to 85Gwh by 2023, 200Gwh by 2025, and 500Gwh by 2030. Moreover, the company is growing at a rapid pace, with the recent announcement to form a joint venture with the US automaker Ford.
Accordingly, the annual operating profit in 2022 for SK Innovation’s battery business is expected to be a surplus. Then with the quick recovery of the operating profit margin starting from 2023, the company expects to keep high single-digit profit from 2025.
Moreover, the company will expand the battery application market to products such as Energy Storage System (ESS), flying cars, robots, and others, and also provide services such as the Battery as a Service (Baas) platform business, preparing to execute measures that will act as the new growth engines.
Meanwhile, the battery business will continues the Life Cycle Assessment (LCA) and improvement in order to complete its ESG management. Based on this, it has set the goal to join the RE100 by 2030 and achieve Carbon Net Zero by 2035.
<>E&P Business spin-off, the manifestation and growth of the “from Carbon to Green”
Regarding the E&P business spin-off, SK Innovation revealed, “We made the decision to create a more detailed and specific strategy for our Green Transformation.”
Although oil and carbon emission go together, the company’s E&P business knows best about the oil industry – still the most important source of energy today. The plan is to ensure growth by innovating the business model to be more eco-friendly, wherein the carbon will not be emitted during the oil production stage, and the emitted carbon of the usage stage would be permanently captured and stored below the earth.
Through this spin-off, SK Innovation plans to promote the transition to a green business model with the goal of minimizing carbon emissions by utilizing the experience and capabilities of the E&P business accumulated over a long period of time.
In other words, as oil is still an important energy source despite the issue of carbon generation, as a company that knows the oil development business best, it will not only minimizes carbon emission from the oil production stage, but also transform its business model into green business that capture the carbon emissions in the oil production stage and then store them permanently in a deep underground structure.
In fact, E&P business already signed an agreement with a state company to develop CCS technology in May, ramping up its efforts to change its business course to a green one.
SK Corporation’s E&P business took off in 1982 after SK acquired Yukong company and set up the resource planning office to spearhead the “Resourceless Oil-Producer Project,” which aimed to place South Korea as one of the oil producers in the world. Currently, it is engaging in 10 mines and 4 LNG projects around the world.
CEO of SK Innovation Kim Jun said, “The spin-off, which will take us towards green growth, is highly significant in the sense that it will secure fundamental competitiveness in each business and create and accelerate new growth.” “We will accomplish our green growth strategy and create enterprise values that will satisfy every stakeholder.”
(Photo 1) SK Innovation’s corporate structure (Before and After the spin-off)
(Photo 2) CEO of SK Innovation Kim Jun talks about the company’s “Carbon to Green” strategy at SK Innovation’s Story Day event held at Seoul, Korea on July 1st
(Photo 3) SK Innovation’s EV battery plant located in Seosan, South Korea
(Photo 4) Block 15-1 offshore Vietnam, where SK innovation is producing crude oil