'New SK Ino' Takes First Step... Energy Giant Swallowing Future Energy and Cash Cow

Official Launch of Integrated Corporation with SK E&S on the 1st
Strengthening Comprehensive Energy Portfolio and Improving Financial Stability

The energy giant 'New SK Innovation,' born from SK Group's business rebalancing, officially launched on the 1st. By integrating SK Innovation, which was an intermediate energy holding company, with the solid cash cow SK E&S, the company plans to proactively respond to the decarbonization era and stabilize its profit structure. The newly established Energy Solution Business Unit within the company has also begun full-scale activities by appointing its head.

On the 1st, SK Innovation transformed into the largest private energy company in the Asia-Pacific region with assets worth 105 trillion KRW (as of the first half of this year) and sales of 88 trillion KRW (as of the end of last year) through the absorption merger of SK E&S. This reunion of the two companies comes 25 years after their separation in 1999.

The existing SK E&S will operate as a Company-In-Company (CIC) and will use the new name 'SK Innovation E&S.' On the same day, SK Innovation completed the merger procedures with its subsidiaries SK On and SK Trading International. By February 1st next year, it also plans to complete the merger with SK On and SK Entum.

The merged entity of SK Innovation and SK E&S, with assets totaling 105 trillion won (as of the first half of this year), has officially launched. After about three months of preparation following the merger announcement in July, the largest private energy company in the Asia-Pacific region has been established. The photo shows the SK Seorin Building in Jongno-gu, Seoul, where SK Innovation's headquarters is located. Photo by Kang Jin-hyung

Proactive Response to Uncertainty and Chaos... Portfolio Competitiveness Up

With this merger, 'New SK Innovation' strengthens its portfolio as a comprehensive energy company to enhance business competitiveness while also securing financial stability to cope with market uncertainties. The biggest change is the establishment of a stable portfolio that includes existing businesses such as petroleum energy and chemicals, next-generation growth engines like batteries, and renewable energy sources such as liquefied natural gas (LNG), hydrogen, wind power, and recycled plastics held by SK E&S.

SK Innovation had already been shifting its sales focus from refining and petrochemicals to batteries. Before the integration, the sales proportion of the petroleum business decreased from 73% in 2019 to 63% last year, while the battery business increased from 1% to 17% during the same period. The profitability of SK E&S, which generates stable annual operating profits exceeding 1 trillion KRW, is also expected to serve as a backbone for active investment in this process.

The integrated SK Innovation is regarded as the most radical company in the decarbonization era even compared to major overseas energy companies. Recently, traditional energy companies such as ExxonMobil, Shell, and BP have also ventured into new businesses, but they share a common limitation of focusing only on enhancing synergies related to existing businesses.

Expectations for Organizational Synergy... Focus on New Leadership

After announcing the merger plan in July, SK Innovation launched the 'Integration Synergy Promotion Team' to accelerate the creation of business synergies. The team selected four major business areas expected to yield quick results: ▲ LNG value chain ▲ Trading ▲ Hydrogen ▲ Renewable energy, and has begun concrete commercialization efforts.

First, to strengthen the stability of power production and supply and reduce costs, the company is reviewing plans to build self-generation facilities within the SK Ulsan Complex (CLX) and directly import LNG. A project is underway for SK Innovation to directly secure and utilize condensate (a volatile liquid hydrocarbon byproduct produced during natural gas extraction) extracted from the Barossa Caldita (CB) gas field in Australia, which SK E&S is developing.

Collaboration is also anticipated between SK Innovation’s recently established 'Energy Solution Business Unit' and the energy solution business operated by SK Innovation E&S. The company appointed Kim Muhwan, head of SK Inc.'s Green Division, as the inaugural head of the business unit and has received about 30 new energy business personnel from SK Inc., SK Innovation, former SK E&S, SK Energy, and SK Geocentric. The energy solution business optimizes power supply and demand for SK Group affiliates and provides total energy solutions to AI data centers and others. Additionally, leveraging SK Innovation’s research and development (R&D) capabilities, the company plans to continuously expand businesses such as small modular reactors (SMR) and energy storage systems (ESS).

Changes in leadership are also a key point of interest in this integration. Prior to this, SK Innovation appointed CEOs with field experience and engineering backgrounds, including Kim Jonghwa, president of SK Energy; Choi Anseop, president of SK Geocentric; and Lee Sangmin, president of SK IE Technology. Attention is also focused on the role and leadership of Park Sangkyu, CEO and President of SK Innovation, who will lead the 'energy giant' company. Park previously served as chief of staff to Chairman Chey Tae-won and has extensive experience across the group’s businesses, as well as a deep understanding of SK’s rebalancing efforts.