[Infinite Power] LG Chem Breathes New Life, What Are the Remaining Challenges?

[Asia Economy Reporter Park So-yeon] LG Chem held a shareholders' meeting on the 30th at the LG Twin Towers East Building auditorium in Yeouido-dong, Yeongdeungpo-gu, Seoul, and approved the plan to split LG Chem's battery business division.

The spin-off plan for LG Chem's battery business passed with a high approval rate of 82.3% of shares participating in the meeting and 63.7% based on voting rights.

On the afternoon of the same day after the shareholders' meeting, LG Chem sent a message to shareholders saying, "We deeply appreciate your approval of the battery spin-off," and added, "We will humbly accept some concerns raised during the spin-off process."

LG Chem emphasized, "Going forward, nurturing the battery business into the world's top energy solutions company and further enhancing the competitiveness of our existing petrochemical, advanced materials, and bio businesses will dispel shareholders' concerns and meet their expectations," adding, "We will strive to become a global company that enhances corporate and shareholder value."

In the future, LG Chem is expected to make the battery business independent and solidify its position as the undisputed global No. 1 in the battery market, often called the 'second semiconductor.'

LG Chem plans to launch a separate corporation, LG Energy Solution Inc., 25 years after starting battery development, aiming to grow into a company with sales of 30 trillion KRW in 2024, which is 13 times the current scale.

While the market generally expects LG Chem to increase corporate value through the battery spin-off, analyses point out challenges such as large-scale fundraising, safety controversies related to electric vehicle fires, and appeasing dissenting shareholders.

Plans and Challenges for the Newly Established LG Energy Solution

LG Chem plans to spin off LG Energy Solution as a wholly owned subsidiary through a physical division, holding 100% of the shares of the unlisted new corporation.

The physical division method was chosen to maximize synergy in battery material-related areas and to positively impact the corporate value of the parent company, LG Chem, through the growth of the new corporation.

LG Energy Solution aims to become the world's leading energy solutions company in the electric transportation (E-platform) sector, providing a wide range of services throughout the battery lifecycle, including management, leasing, charging, and reuse, beyond just battery manufacturing.

LG Energy Solution is expected to expand timely investments by utilizing various fundraising methods, widening the gap with competitors.

LG Chem explained that other divisions such as petrochemicals, advanced materials, and life sciences will be able to alleviate financial burdens caused by investments in the battery business.

The petrochemical and other divisions plan to reinvest cash generated internally to enhance growth potential and dramatically improve profitability in each business area.

Industry insiders widely speculate that LG Energy Solution will go public to attract large-scale investment funds. With an order backlog reaching 150 trillion KRW and annual facility investments of about 3 trillion KRW, listing is seen as necessary for additional investments.

According to the industry, if LG Energy Solution goes public and issues new shares, it is expected to raise around 10 trillion KRW. However, the company is reviewing various fundraising options and has not made any decisions regarding listing.

Safety controversies triggered by electric vehicle fires, such as the Hyundai Motor Kona EV fire, are acting as negative factors and are pointed out as challenges for the new corporation.

LG Chem denies manufacturing defects in the batteries, and investigations to determine the cause are currently underway. Depending on the results, LG Chem may have to bear the cost of replacing Kona batteries, and regardless of the cause, safety issues remain a burden.

Legal battles related to electric vehicle batteries with SK Innovation domestically and internationally, as well as efforts to appease opposition to the spin-off during the process, are also cited as challenges.