South Korea's Largest Refining and Petrochemical Company SK "30 Trillion Won Investment Over 5 Years, Transforming into an Eco-Friendly Company"

Choi Tae-won, Chairman of SK Group / March 29, 2021 Photo by Joint Press Corps

[Asia Economy Reporter Choi Dae-yeol] SK Innovation, the first and largest company in South Korea engaged in refining business, unveiled on the 1st a blueprint to transform itself into a green business and eco-friendly company centered on electric vehicle batteries. The company announced plans to invest 30 trillion KRW over the next five years to shift its existing carbon-centered business to eco-friendly operations, thereby changing the company's identity. It also aims to increase the proportion of eco-friendly business-related assets from the current 30% to 70%.

SK Innovation's President and CEO Kim Jun, Chairman of the Board Kim Jong-hoon, and other company executives held a 'Story Day' event on the same day to announce these plans. The company had previously presented its innovation direction in 2017 and an execution strategy in 2019, and this is the third time it has disclosed detailed measures.

From Carbon to Green... Completely Changing Company Identity
Focusing on Battery Upstream and Downstream Businesses... "Turning Profitable This Year"

The core of the company's vision announced that day can be summarized as 'Carbon to Green,' meaning transforming the business structure from carbon-centered to green-centered operations. This is a challenging strategy for a company that started the refining business in Korea for the first time, including during the Yukong era, and currently holds the No. 1 domestic market share (based on light oil market share and refining capacity).

The key strategies are threefold. First, strengthening the green portfolio centered on batteries, including separators and used battery recycling. Second, converting existing businesses into eco-friendly business models such as plastic recycling. Third, achieving net-zero greenhouse gas emissions early.

According to the company, the current order backlog for electric vehicle batteries exceeds 1 TWh (terawatt-hour). This level of orders places the company among the top one or two global battery manufacturers. When the company announced its focus on the battery business in May 2017, the order backlog was 60 GWh, so this represents a 17-fold increase, equivalent to over 130 trillion KRW in value. Battery Business CEO Ji Dong-seop said, "By the end of next year, we expect to rank third globally in monthly sales volume."

The company's battery production capacity is expected to increase from the current 40 GWh to 85 GWh in two years, 200 GWh in 2025, and over 500 GWh by 2030. The company forecasts EBITDA to turn positive this year, reach 1 trillion KRW in two years, and 2.5 trillion KRW by 2025. The lithium-ion battery separator (LiBS) business, a core battery material, will also expand production from the current 1.4 billion square meters to 2.1 billion square meters in 2023 and 4 billion square meters in 2025, aiming to solidify its global No. 1 position.

Additionally, the company plans to expand used battery recycling (BMR), the Battery-as-a-Service (BaaS) platform business managing battery life cycles, and broaden battery applications beyond electric vehicles to energy storage systems and flying cars.

100% Recycling of Waste Plastic
Transition to Circular Economy Centered on Eco-Friendly Production

SK General Chemical, which operates the chemical business, will introduce an urban oil field business model. The company aims to completely reinvent itself as a recycling-based chemical company by converting waste plastic back into petroleum. President Kim Jun said, "The ultimate goal of SK Innovation's green strategy is to leave no footprint from fossil fuel use (No Footprint Left Behind)," adding, "We will complete a circular economy model that recycles 100% of the plastic volume produced by SK General Chemical."

By developing proprietary technology and through overseas mergers and acquisitions, the company plans to recycle over 2.5 million tons of plastic produced domestically and internationally by 2027 and achieve a 100% share of recyclable eco-friendly products. SK General Chemical President Na Kyung-soo said, "Compared to glass and steel, plastic is environmentally friendly in production but has a low recycling rate, which is problematic," adding, "We will turn the plastic issue into a growth opportunity as a recycling and eco-friendly materials company." He further stated, "By 2025, the green business alone will generate over 600 billion KRW in EBITDA, accounting for more than half of total profits."

Meanwhile, the petroleum business will improve its operational structure focusing on minimizing carbon emissions in crude oil refining, trading, and exploration & production (E&P). All business sites will be converted to low- and decarbonization systems, reducing transportation fuel production while increasing petrochemical product output and simultaneously pursuing various methods such as carbon capture and bioenergy.

The company officially stated that it is considering a spin-off to enhance business value for its battery and E&P divisions. President Kim Jun said, "SK Innovation will focus on its role as a holding company specializing in developing green portfolios, discovering second and third battery and separator businesses through R&D, new business development, and mergers and acquisitions in the green sector," adding, "We will invest 30 trillion KRW, more than double the investment of the past five years, to increase the share of green assets from the current 30% to 70%."

This content was produced with the assistance of AI translation services.