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LG Chem to spin off battery business into separate company

September 18/2020

MOSCOW (MRC) -- LG Chem decided to spin off its battery business into a new company amid growing demand for electric vehicle (EV) batteries, said Chemweek.

It plans officially to launch the new entity with the tentative name LG Energy Solutions on 1 December 2020 after approval from an extraordinary shareholders' meeting to be held on 30 October. LG Chem will possess all the shares issued by the new battery company and it will own 100% of its non-listed shares.

LG Chem says that Уit came to the judgment that this is the right time for the corporate spin-off as the battery industry is growing rapidly and structural profits in the EV battery sector are being made in earnest."

LG Chem is targeting sales for the new company of 30.0 trillion South Korean won (USD25.5 billion) in 2024. The expected revenue of the business is about W13 trillion this year. LG Chem has not confirmed if it is planning an initial public (IPO) offering of the new company, but says it will review the situation continuously in in the future.

As worldwide exhaust gas emission and fuel economy regulations are further tightened, major international automakers are advancing the launch of EV models, and the EV battery market is growing rapidly, according to LG Chem. The company is expanding its orders to global automakers to supply the next-generation EV market and plans to strengthen production and quality capabilities.

LG Chem says it will be possible, through the spin-off, to attract large investments, while easing financial burdens by establishing an independent financial structure for each of its business sectors. The company says it will be able to receive appropriate evaluations of the business value for each of its business units including the battery business.

Major battery customers of LG Chem include Hyundai and Kia in South Korea; General Motors (GM), Ford, and Chrysler in the US; and Volkswagen, Renault, Volvo, Audi, Daimler, Mercedes-Benz, Jaguar, and Porsche in Europe.

LG Chem says that it has currently procured more than W150 trillion in EV battery orders and is investing more than W3 trillion annually in production facilities, and so the need to procure large investment funds in a timely manner has also increased. The company plans to expand its total battery production capacity to more than 100 gigawatt-hours (GWh) by the end of 2020.

By 2023, it is expected to more than double capacity to over 200 GWh. It plans to expand its combined annual capacity to 3.3 million EV batteries by 2020. The company currently operates production bases in Europe, the US, and China, which account for about 90% of the pure EV market.

The company in 2018 decided to invest W2.1 trillion to build a second plant to produce EV batteries at Nanjing, China. In 2019, LG Chem and GM decided to invest USD2.3 billion to establish a battery-cell assembly plant on a greenfield site in the Lordstown area of northeastern Ohio. The company in 2019 secured USD5 billion in loans from South Korea to expand its battery business.

LG Chem says that by concentrating investments in its petrochemicals, advanced materials, and bio sectors, it plans to establish itself as a "global top five chemical company" with balanced business portfolios alongside the battery business.

As MRC informed earlier, LG Chem signed a conditional contract with Ningbo, China-based Ningbo Shanshan to sell a large portion of its liquid crystal display (LCD) polarizer business for USD1.1 billion. The sale reflects LG's strategy of exiting from the LCD business as cut-price Chinese electronics makers, such as Beijing-based BOE Technology, dominate the business.

Ethylene and propylene are feedstocks for producing PE and polypropylene (PP).

According to MRC's ScanPlast report, Russia's overall PE production totalled 1,712,400 tonnes in the first seven months of 2020, up by 58% year on year. Linear low density polyethylene (LLDPE) accounted for the greatest increase in the output. At the same time, overall PP production in Russia increased in January-July 2020 by 24% year on year to 1,063,700 tonne. ZapSibNeftekhim accounted for the main increase in the output.

LG Chem Ltd., often referred to as LG Chemical, is the largest Korean chemical company and is headquartered in Seoul, South Korea. According to ICIS report, it is 15th biggest chemical company in the world in 2011. It has eight domestic factories and global network of 29 business locations in 15 countries. LG Chem is a manufacturer, supplier, and exporter of petrochemical goods, IT&E Materials and Energy Solutions.
Author:Anna Larionova
Tags:petroleum products, PP, PE, ethylene, propylene, petrochemistry, LG Chem.
Category:General News
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