SK Innovation spins off battery, oil exploration & production
SK Innovation has decided to spin off its battery and exploration and production (E&P) businesses, making them stand-alone autonomous companies on October 1st. An extraordinary general meeting will be held on September 16 to approve the action by SK Innovation’s Board Of Directors led by Chairman Kim Jong-hoon.
Tentatively, the new companies will be named “SK Battery Co., Ltd.” and “SK E&P Co., Ltd.” The decision was based on the necessity to enhance SK innovation’s corporate value.
According to this decision, SK Innovation will be a holding company that plays the role of the “Green Portfolio Designer & Developer.”
“SK Innovation will accelerate the Carbon to Green growth strategy that we are strongly promoting, and intensively increase our corporate value,” Kim said.
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 Battery Metal Recycle (BMR) business, which is currently being promoted, in full swing.
The spin-off of these 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.
SK Battery Co., Ltd. will be responsible for the medium-to-large-sized EV batteries, Battery as a Service (BaaS), and Energy Storage System (ESS). SK E&P Co., Ltd. will be in charge of SK’s oil exploration and production business, and the Carbon Capture & Storage (CCS) business.
“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 their overall expertise and competitiveness,” said Kim. “Attracting investment and increasing business value in each business will provide more flexibility to quickly and comprehensively respond to various management environments.”
SK Innovation said the spin-off will be a turning point for securing global competitiveness in the battery business. Currently, the company holds an annual battery production capacity of 40GWh, producing from various countries, including South Korea, the United States, China, and 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 U.S. automaker Ford Motor Co.
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 profits 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 new growth engines.
Meanwhile, the battery business will continue 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.
Regarding the E&P business spin-off, SK Innovation said, “We made the decision to create a more detailed and specific strategy for our Green Transformation.”
Although oil and carbon emissions 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 understands the oil development business, it will not only minimize carbon emissions from the oil production stage, but it can also transform its business model into a green business that captures carbon emissions in the oil production stage and then store them permanently in a deep underground structure.
SK’s E&P business has 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 world’s major oil producers. Currently, the company is engaged in 10 mines and four LNG projects around the world.
“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,” said Kim. “We will accomplish our green growth strategy and create enterprise values that will satisfy every stakeholder.”