SK On seeks up to $1.5 billion in new funding

SK On Co., a South Korean electric vehicle battery maker, is seeking to raise up to 2 trillion won ($1.5 billion) to step up facility investments, bucking the purse-tightening trend in response to the cooling EV market, according to the company and investment banking sources on Monday.

The world's fifth-largest EV battery maker recently sent requests for proposals to multiple global investment banks to select underwriters for the fundraising.

It has not determined its fundraising target yet and is open to bankers’ suggestions about the funding size and methods. The sources said a new round of capital injection could amount to as much as 2 trillion won.

The new fundraising plan comes less than a year after SK On attracted a total of 2.25 trillion won in equities at a valuation of 25 trillion won in June last year: 1.2 trillion won from an MBK-led consortium including BlackRock and Qatar Investment Authority, and 1.05 trillion won from a Korea Investment Partners-led group.

Its estimated valuation could rise to 30 trillion won, the sources added.

FACILITY INVESTMENTS

The proceeds will be used to build and expand facilities, mainly overseas. They include three US plants under construction in partnership with Ford Motor Co. in Kentucky and Tennessee to produce batteries with a capacity of 127 gigawatts hours (GWh), in a project worth $11.4 billion.

SK On is also poised to build a 35GWh battery plant in the US state of Georgia in partnership with Hyundai Motor Co., while expanding capacity in four plants in Yuncheng, China and two factories in Seosan, South Korea.

It expects to boost its capacity to more than 220GWh by 2025 and 500GWh by 2030, compared to 88GWh in 2023.

This year, SK On plans to spend 7.5 trillion won ($5.6 billion) on battery facilities to take the lead in the industry, its parent company SK Innovation Co. said during a fourth-quarter earnings call.

Its aggressive investment plans buck the trend of carmakers slowing the pace of electrification due to weaker-than-expected demand.

WORKFORCE INCREASE

SK On is also ramping up new hiring to develop a large-size battery with the 4680 form factor, increasingly adopted by major EV makers such as Tesla Inc., according to battery industry sources on Sunday.

SK swung to a profit in terms of earnings before interest, tax, depreciation and amortization in the fourth quarter of last year, signaling a turnaround in its earnings.

“Investors are skeptical about its financing capability as the share prices of LG Energy Solution and Samsung SDI tumbled by 30 to 40% off their highs touched in June last year,” an investment banker told Market Insight, the capital market news outlet of The Korea Economic Daily.

“But (battery) orders are steadily increasing and its fourth-quarter results seem to have eased concerns that it might shock the market with unexpectedly heavy losses,” he added.

According to consensus estimates, SK On’s revenue growth is projected to slow to 14.2% to 15.07 trillion won in 2024, compared to the 73% surge in 2023.

Write to Jun-Ho Cha at chacha@hankyung.com
 

Yeonhee Kim edited this article.