SK Inno Decides to Split Battery and E&P Businesses

Official Launch as a Separate Corporation Starting October 1

[Asia Economy Reporter Yoonju Hwang] SK Innovation has decided to split its battery and Exploration & Production (E&P) businesses into independent companies to establish autonomous management systems.

SK Innovation announced on the 3rd that it held a board meeting and resolved to split the battery and E&P businesses, recognizing their growth potential and competitiveness, and deeming it necessary to enhance SK Innovation’s corporate value. After obtaining approval at an extraordinary general meeting of shareholders on September 16, it plans to officially launch the newly established companies, tentatively named 'SK Battery Co., Ltd.' and 'SK E&P Co., Ltd.', on October 1.

With the decision to split the two businesses, SK Innovation will focus on enhancing corporate value as a holding company playing the role of 'Green Portfolio Designer & Developer.'

To this end, SK Innovation plans to discover second and third battery and separator (LiBS) businesses by strengthening R&D, business development, and M&A capabilities centered on green sectors. The newly initiated Battery Metal Recycle (BMR) business for recycling used batteries is also set to grow significantly. This direction was already announced by President Kim Jun on July 1 during the Story Day event.

The split of the two businesses will be a simple and physical division, with SK Innovation owning 100% of the shares of the newly established companies. Assets and liabilities related to the divided businesses will be transferred to the new companies accordingly.

SK Battery Co., Ltd. (tentative name) will handle medium and large batteries for electric vehicles, Battery as a Service (BaaS), and Energy Storage System (ESS) businesses, while SK E&P Co., Ltd. (tentative name) will manage oil exploration and production, as well as Carbon Capture and Storage (CCS) businesses.

Kim Jong-hoon, Chairman of SK Innovation’s Board, stated, "This split is a decision to establish management systems tailored to each business’s characteristics and to proactively strengthen fundamental competitiveness by enhancing expertise. Each business will increase flexibility to respond more broadly and swiftly to the management environment through investment attraction and business value enhancement."

◆ Establishing a foundation for competitiveness through battery business split = SK Innovation said this split will be a turning point to secure global competitiveness in the battery business. The battery business aims to grow into a global top player based on an order backlog of ‘1 terawatt + α,’ as announced on July 1 during the Story Day event.

SK Innovation already has an annual battery production capacity of about 40GWh at bases in Korea, the United States, China, and Hungary, and plans to rapidly expand to 85GWh in 2023, 200GWh in 2025, and over 500GWh by 2030. Recently, SK Battery business has been growing rapidly in various ways, including establishing a joint venture with Ford in the U.S.

Through this, SK Innovation’s battery business achieved an annual operating profit surplus in 2022, expects operating profit margins to improve rapidly from 2023, and anticipates maintaining a high operating profit margin in the high single digits after 2025.

Additionally, SK plans to expand new battery application markets such as Energy Storage Systems (ESS), flying cars, and robots, and accelerate the execution of new growth engines like the BaaS platform business, which expands from battery products to services.

Meanwhile, to complete ESG management in the battery business, SK Innovation is promoting continuous battery life cycle assessment (LCA) and improvements, and has set goals to achieve RE100 by 2030 and Carbon Net Zero by 2035 based on these efforts.

◆ E&P business spin-off, concrete execution of ‘Carbon to Green’ = SK Innovation explained that the split of the E&P business was decided to concretely implement the green innovation strategy called ‘Carbon to Green Transformation.’

Through this split, SK Innovation plans to leverage the long-accumulated experience and capabilities in oil development to pursue a transition to an eco-friendly business model aiming to minimize carbon emissions.

In other words, although oil has carbon emission issues, it remains an important energy source. As the company most knowledgeable about oil development, SK Innovation aims to minimize carbon emissions from the oil production stage and innovate its business model into a green business by capturing carbon emitted during oil refining and usage stages and permanently storing it deep underground.

The E&P business has already accelerated its transition to green business areas, signing a national project agreement related to CCS in May.

SK’s E&P business began in earnest after SK acquired Yukong and established the Resource Planning Office in 1982. Currently, it participates in 10 oil blocks and 4 LNG projects worldwide.