Smaller SK affiliates to get boost from SK Inno, E&S merger

[Photo by Han Joo-hyung]

The merger between SK innovation Co. and SK E&S Co. will enable battery company SK on to directly benefit from their operations and potentially alleviate its financial burdens. SK Innovation and SK E&S, two major energy affiliates of South Korea’s SK Group, approved a proposed merger of the two companies in their separate board meetings on Wednesday, a move that will birth a mega-scale energy enterprise worth 100 trillion won ($72.47 billion) in assets.

SK on also approved the merger alongside SK trading international and SK enterm. SK trading international is a trading company specializing in crude oil and petroleum products, and recorded sales of 48.96 trillion won and operating profits of 574.6 billion won in 2023. It also played a crucial role by handling dividends of 800 billion won.SK enterm, engaged in tank terminal operations, also posted sales of 64.4 billion won in the first quarter of this year, solidifying its status as a stable earner, irrespective of market conditions.

In this regard, SK on’s approval of the merger with these two companies offers potential for improving its financial structures. The merger will also give the company the strength to dominate the market when the electric vehicle market recovers, with the electric vehicle battery industry still requiring R&D and additional investments. But if SK on fails to rebound despite this support strategy, it will deal a major blow to SK Group.

If former President Donald Trump is re-elected in the U.S. presidential election in November, the electric vehicle battery industry, which has invested heavily in the United States, could face another major crisis as Trump advocates for the repeal of the U.S. Inflation Reduction Act (IRA) and other related laws.

Another concern is that SK on has been slow to develop other battery types such as prismatic and cylindrical, unlike its competitors. If the company does not promptly diversify its portfolio to overcome the current situation of mainly selling pouch-type batteries, it will not be able to secure competitiveness as a latecomer, rather than a market leader.