SK On seeks $2.5 bn in new funding for battery plants

SK On Co., one of South Korea's top three rechargeable battery makers, plans to raise around 3 trillion won ($2.5 billion) in a pre-IPO share sale next year to fund ita massive investment plans for overseas plants. 

The new funding, if completed, will set a record for the largest-ever fundraising by a unit of the SK Group, which is now building new battery plants in the US, Hungary and China for supply to electric vehicle makers.

SK On, with an equity capital of 2 trillion won, recently selected Deutsche Bank and JPMorgan to advise its pre-IPO share sale, according to investment banking sources on Nov. 25.

It has sent teaser letters to global private equity firms, including Blackstone, KKR, Carlyle, TPG, Brookfield and Warburg Pincus, about its proposed share sale. Some of the PE firms began due diligence on SK On, the sources said.

The battery supplier for EVs and energy storage systems will receive bids for its shares early next year, while it aims to go public within the next five years.

SK On is wholly owned by SK Innovation Co., which last month split off the battery division into SK On and the oil exploration and production business into SK Earthon Co.

As a latecomer to the EV battery market, SK On's value could rise to 20 trillion to 30 trillion won by the second half of next year, when some of its overseas plants under construction will come online, the sources said.

By comparison, Samsung SDI has a market capitalization of 49 trillion won. 
LG Energy Solution Ltd., preparing to list on the Korea Exchange at the end of next January, is estimated at 80 trillion to 100 trillion won in corporate value.

LG Energy plans to raise as much as 10 trillion won in capital through the IPO,
according to industry sources earlier this week. 

CAPACITY EXPANSION

To play catch-up with rivals, SK On will more than double its production capacity from the current 40 gigawatt-hours (GWh) to 85 GWh by 2023 and expand over tenfold to 500 GWh by 2030.  

Last September, SK and Ford Co. announced a plan to double their investments to a combined $11.4 billion in the US. Under the plan, their 50:50 joint venture, BlueOvalSK, will build an assembly and battery plant in Tennessee, and two other battery factories in Kentucky, to more than double their capacity to 129 GWh versus the current 60 GWh.

Separately, SK On is building its second battery plant in the US state of Georgia.

In China, SK On will spend 3 trillion won building its fourth EV battery plant, adding to the three factories in operation there with a combined capacity of 27 GWh. 

In Europe, it will invest 2.6 trillion won in building a third EV battery plant in Hungary with a capacity of 30 GWh, which is set to become the company's largest-ever battery plant in Europe.

Write to Chae-yeon Kim at why29@hankyung.com
Yeonhee Kim edited this article.