[Asia Economy Reporter Donghoon Jeong] SK On has succeeded in raising large-scale investment funds through domestic and international policy finance institutions.
On the 28th, SK On announced that it had successfully secured a total of $2 billion (approximately 2.624 trillion KRW) in investment funds through Euler Hermes, a German trade insurance institution, the Korea Trade Insurance Corporation, and the Export-Import Bank of Korea.
The three institutions support the funds by providing guarantees or insurance during SK On's loan process from overseas commercial banks.
Euler Hermes and the Korea Trade Insurance Corporation provide insurance worth $800 million and $700 million respectively, while the Export-Import Bank of Korea provides a $200 million guarantee. At the same time, the Export-Import Bank of Korea directly loans $300 million to SK. Based on this, SK On plans to sequentially draw funds from seven overseas commercial banks starting next month. The loan is a long-term type with a 2-year grace period and 5-year equal installment repayment terms.
Since its establishment through a physical division in October last year, SK On has maintained close consultations with the three institutions and overseas commercial banks.
All three institutions participating in the financing are 'official export credit agencies' (ECAs). ECAs support the exports of domestic companies and create national interests by directly lending to companies or providing guarantees or insurance during the loan process. This allows companies to receive competitive interest rates.
The $2 billion secured by SK On through this green ECA financing is the largest scale among ECA deals by global battery companies and also the largest case of Euler Hermes supporting a Korean company.
This was possible because SK On was recognized by the ECAs not only for the large volume of supply orders already received from automakers but also as a representative green business that reduces carbon emissions.
The Export-Import Bank of Korea and the Korea Trade Insurance Corporation highly evaluated that SK On's European battery business contributes to national interests, and Euler Hermes is known to have participated in the financing because Volkswagen cars equipped with SK On batteries are exported to overseas markets.
SK On plans to use the secured funds for investment in its third European plant under construction in Ivancsa, Hungary. The Ivancsa plant, with a total investment of 3.31 trillion KRW, is expected to produce batteries with a capacity of 30 gigawatt-hours (GWh), capable of supplying 430,000 electric vehicles annually starting in 2024.
With SK On securing large-scale investment funds, the ongoing pre-IPO investment attraction is also expected to be in a more advantageous position.
SK On is a rapidly growing battery company through proactive investment. It first entered the global battery market top 10 by ranking 9th in 2019 and raised its rank to 5th last year, just two years later. It is currently building new plants in the US, Europe, and China. Through this, it plans to increase its production capacity from 1.7 GWh in 2017 to 77 GWh by the end of this year, 220 GWh by 2025, and 500 GWh by 2030.
An SK On financial official said, "This fund raising will be a key driving force for SK On to leap into a global top-tier company," adding, "We will continue to support corporate growth through various funding measures in the future."
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