SK innovation targets $14 bn EBITDA by 2030 with merger

SK Innovation CEO & President Park Sang-kyu speaks at a press conference on the morning of 18 July. [Photo by Yonhap]

SK innovation Co. aims to achieve 20 trillion won ($14.4 billion) in EBITDA by 2030, with its merger with SK E&S Co. set for November 2024.

At a press conference on Thursday at SK Group‘s central Seoul offices, SK innovation Chief Executive Officer Park Sang-kyu announced the company’s target. “We aim to become a comprehensive energy company with an EBITDA of 20 trillion won by 2030,” he said, noting that 2.2 trillion won of this goal would come from merger synergies. These synergies include 1.7 trillion won from electrification businesses and 500 billion won from the petroleum and gas sectors, with Park adding that the companies would form a task force to maximize these synergies.

Both companies’ boards approved the merger plan on Wednesday. SK innovation was valued at 10.8 trillion won and SK E&S at 6.2 trillion won, with each SK E&S share being exchanged for 1.19 SK innovation shares.

The merger aligns with SK Group’s strategy to strengthen core competitiveness as it aims to address the stagnation in SK innovation’s electric vehicle battery sector and overall portfolio. SK innovation needs growth strategies for its main fields of petroleum and chemicals and SK Inc., the largest shareholder of both companies, with 36.2 percent of SK innovation and 90 percent of SK E&S, will see its stake in SK innovation rise to 55.9 percent after the merger.

“We have been seeking a bridge between our petrochemical and battery sectors, and liquefied natural gas (LNG), renewable, and hydrogen energy were added to serve as that bridge,” Park said, emphasizing the demand for total energy solutions from global companies.

The merger is expected to resolve compensation issues for SK E&S’s financial investors. SK E&S issued redeemable convertible preferred shares (RCPS) in 2021 and 2023, raising 3.14 trillion won from KKR & Co. Inc. As the redemption dates in 2026 and 2028 draw closer, SK E&S plans to reissue the RCPS under the same conditions post-merger, with KKR likely to reinvest. SK E&S said it is in “friendly negotiations” with KKR to ensure the merger does not burden the new entity.

Three other SK innovation subsidiaries, including SK on Co., also approved the merger on Wednesday. “SK on can enhance its battery business sustainability with an annual EBITDA of 500 billion won from trading and tank terminal businesses,” Park said.

SK’s board decided to transfer control of its subsidiary SK materials airplus Inc. and Essencore under the subsidiary’s control to SK ecoplant Co. on Thursday.