"No Retreat"‥SK Inno Fully Charges US Battery Investment

Investment of 1.1 trillion KRW Executed for Second Battery Factory in the U.S.

[Asia Economy Reporter Park So-yeon] SK Innovation is executing an investment of approximately 1.1 trillion KRW to build its second battery factory in Georgia, USA, despite the challenges posed by the COVID-19 pandemic. The prolonged battery lawsuit with LG Energy Solution has led to the decision that further delays in investment are no longer possible. As SK Innovation resumes aggressive battery investments in North America, a trickle-down effect is expected to benefit domestic partner companies amid a dry spell in orders.

Guarantee for Green Bonds to be Issued Next Year by Subsidiary SK Battery America

◇Decision to Invest 1.1 Trillion KRW in SK’s U.S. Battery Factory=According to industry sources on the 21st, SK Innovation held a board meeting on the 18th and decided to provide a debt guarantee for green bonds worth 1.0928 trillion KRW to be issued in January next year by its electric vehicle battery subsidiary, 'SK Battery America' (SKBA). Green bonds are bonds issued to raise funds for environmentally friendly projects. SKBA plans to use the 1.1 trillion KRW investment for the construction costs of the second electric vehicle battery factory. Following the groundbreaking of a 9.8 GWh (gigawatt-hour) battery factory in Georgia last year, SK Innovation decided earlier this year to build a second factory. The second factory, with a capacity of 11.7 GWh, began construction in July and is scheduled to start full-scale production in 2023. The total construction cost for the second factory is 1.5 billion USD, with about 900 billion KRW (half) of the investment approved at the board meeting in April, and the remaining investment confirmed at the recent board meeting. According to SK Innovation, the total investment approved so far for the first and second battery factories amounts to approximately 3 trillion KRW. In the long term, a total of 5 billion USD (about 6 trillion KRW) is planned to be invested. SK Group Chairman Chey Tae-won stated at the SK Night event held in Washington D.C. two years ago, "We hope to grow together with American society beyond just expanding our North American business," and described the project as "a maximum 5 billion USD project to create about 6,000 jobs at the U.S. electric vehicle battery factories." By 2023, when the first and second factories are fully completed, SK Innovation will have a production capacity of 21.5 GWh in the U.S., increasing its global production capacity to 80.5 GWh. Starting in 2023, when the first and second factories begin full operation, SK Innovation expects to secure a stable supply base for batteries to U.S. automakers, leading to additional orders. Currently, SK Innovation’s electric vehicle battery business backlog reportedly exceeds 50 trillion KRW. Annual production capacity is projected to reach 85 GWh in 2023 and 100 GWh by 2025.

Production Capacity to Increase to 21.5 GWh in the U.S. upon Completion in 2023
Partner Companies such as Ncam and EcoPro BM Localizing in the U.S. to Lay Foundation for Joint Growth

◇Expectations for Partner Companies’ Trickle-Down Effect... ‘A Rain in the COVID Drought’=Once SK Innovation operates facilities with an annual capacity of 21.5 GWh in the U.S. starting in 2023, batteries sufficient to supply approximately 430,000 electric vehicles will be produced. Accordingly, partner companies are swiftly localizing their operations to establish a foundation for joint growth. Electrolyte supplier Ncam has been the fastest to move, building a factory in Georgia with an annual production capacity of 20,000 tons, which is expected to begin operations early next year. Electrolyte is one of the four essential materials for battery manufacturing, and significant sales are anticipated to coincide with the completion of SK Innovation’s factory. Cathode material supplier EcoPro BM also established EcoPro BM America in Georgia last November to pursue localization. EcoPro BM is a key cathode material partner of SK Innovation. Dongwon Tech, a manufacturer and supplier of HVAC (heating, ventilation, and air conditioning) systems for temperature control and ventilation within factories, recently announced an investment of 700,000 USD in Hall County, Georgia, to open a high-end HVAC duct manufacturing facility and sales office. Dongwon Tech is also one of the major suppliers related to SK Innovation’s Georgia factory construction. Battery equipment supplier Toptec plans to expand its equipment supply to SKBA as well. An SK Innovation official said, "Although the lawsuit is ongoing and uncertainties remain unresolved, we cannot stop investing here. Especially since domestic small and medium-sized partner companies are involved in battery and material businesses expanding into the U.S., China, and Europe, we continue aggressive yet cautious investments with a strong sense of responsibility."