Korea’s battery makers banking on big funding to boost production, R&D

LG Energy Solution Ltd. factory in Ochang, North Chungcheong Province [Courtesy of LGES]

South Korea’s electric vehicle battery companies are seeking large-scale financing to further enhance their technological competitiveness and expand production capacity to meet fast growth of the global EV market.

According to sources on Monday, LG Energy Solution Ltd. recently issued its first corporate bond since its inception. The bond sale doubled to 1 trillion won ($762 million) after 4.72 trillion won applied during a book building period.

LG Energy Solution plans to use the funds to bolster battery production capacity and expedite research and development efforts for next-generation batteries. Out of the total 1 trillion won raised, 100 billion won will be allocated for operational purposes, such as procuring cathode materials, while the remaining 900 billion won will be directed towards joint venture investments.

Earlier, LG Energy Solution announced the establishment of a North American joint venture with automakers Stellantis, Honda and Hyundai Motor Group, respectively, and began construction of factories.

Against this backdrop, LG Energy Solution invested 6.3 trillion won in global battery production capex last year. This year, the company plans to increase its investment by more than 50 percent. LG Energy Solution also invested 876 billion won in R&D last year. Its R&D investment increases every year.

SK on Co., a late entrant in the EV battery industry and still a loss-making company, has recently attracted a series of large-scale investments. SK on’s parent company, SK innovation Co. raised $400 million from a new financial investor in Singapore earlier this month.

[Courtesy of SK on]

Earlier in May, SK on secured pre-IPO equity investment totaling 1.24 trillion from MBK Consortium and Saudi SNB Capital.

It also raised 1.2 trillion won in investment funds through the Korea Investment PE Eastbridge Consortium by March this year and received 2 trillion won from SK innovation through a capital increase in December. It also sold a 1.2 trillion won Eurobond in the global bond market and borrowed 2 trillion won from Hyundai Motor Group.

In terms of policy support, the company received $2 billion from the European Export Credit Agency (ECA) in July last year and BlueOval SK, the joint venture between SK on and Ford Motor Co., recently secured up to $9.2 billion from the U.S. Department of Energy.

SK on is using these various sources of financing to strengthen its financial position, which it plans to use to expand the annual production capacity of its EV battery plants in the U.S., Europe and China to 220 gigawatt-hours in 2025 from 88 GWh last year.

SK on already spent 2.15 trillion won on new and expanded battery production lines in the first quarter of this year. This is about 12 times more than the 175.3 billion spent in the first quarter of last year.

Samsung SDI Co. invested 603.4 billion won, up 7 percent from the same period of last year.