Global Credit Rating Agencies Say "SK Innovation-SK E&S Merger Positive for Credit Ratings"

S&P "SK Inno's Investment Burden Will Ease"
Moody's "Positive Cash Generation Ability of E&S"

Global credit rating agencies have forecasted that the merger of SK Innovation and SK E&S will have a positive impact on SK Innovation's credit rating.

According to the credit rating industry on the 24th, global credit rating agency Standard & Poor's (S&P) stated, "This merger will expand SK Innovation's business scale and portfolio, and reduce cash flow volatility," adding, "In the future, the stable surplus cash flow from SK E&S will also help ease SK Innovation's investment burden."

S&P also said that SK Innovation's current credit rating of 'BB+' will be reassessed in a positive direction within 90 days.

S&P explained, "We will reassess the credit rating focusing on the financial outlook of the merged entity and the improvement of the electric vehicle battery business," and added, "If we determine that the merger increases the likelihood of support from the parent company SK Inc., we may upgrade SK Innovation's rating."

Global credit rating agency Moody's described the merger decision between SK Innovation and SK E&S as "positive in terms of SK Innovation's creditworthiness," and forecasted that "the improvement of profitability in the battery business will be an important factor in determining the company's credit rating."

Moody's expects no immediate impact on the rating or outlook. Moody's currently rates SK Innovation's credit rating and outlook as 'Baa3, Negative.'

Moody's explained, "With this merger, based on the 2023 financial statements, revenue is expected to increase by 14% and EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) by 48%," adding, "This reflects the expectation that SK E&S will generate stable profits in the future based on its power generation and LNG businesses."

Earlier, domestic credit rating agencies also evaluated that the merger of SK Innovation and SK E&S could contribute to enhancing financial stability through a diversified business base. The credit rating agencies predicted, "There will be no immediate change in credit rating, but the business portfolio will be diversified and cash-generating capability will be strengthened."

An SK Innovation official said, "Based on the expanded scale and competitiveness, we will grow into a world-class energy company in the global market."