60 Years of a Refinery's Perfect Green Transformation... Battery at the Heart of 'C to G'

Reducing the Share of Core Refining and Petrochemicals
Comprehensively Fostering Battery and Materials Industries
Growing into a Top 3 Global Market Player Next Year

Kim Jun, President of SK Innovation, is announcing the plan to transition to eco-friendly businesses at the Story Day event on the 1st. Photo by SK Innovation

[Asia Economy Reporter Choi Dae-yeol] SK Innovation's decision to reduce the proportion of its core businesses in refining and petrochemicals at the group level and focus on new businesses centered on batteries is interpreted as an effort to respond more quickly to environmental issues and enhance competitiveness in the market.

Since the current petroleum-centered business has limitations in reducing carbon emissions, the company plans to apply environmentally friendly technologies as soon as possible. Considering that the battery business, which is regarded as the group's future growth engine, is still in the early stages of market expansion, SK Innovation aims to take the lead in responding and increase its market dominance. Currently, the asset ratio between carbon-centered businesses and eco-friendly businesses is about 7 to 3, but the plan to completely reverse this to 3 to 7 reflects an awareness of the risk that failure to proactively address environmental issues could lead to market elimination.

Focused Development of Battery Upstream and Downstream... "Global Top 3 by Next Year"

The core of SK Innovation's plan, announced on the 1st, is 'Carbon to Green,' meaning reducing the carbon-intensive petroleum business and significantly expanding environmentally friendly businesses to completely transform the company's identity.

The focus is on batteries. Although SK is considered a relatively latecomer compared to LG or Samsung in the electric vehicle battery market, the company expects to aggressively expand its scale and rise to the global top 3 by the end of next year. The battery order backlog disclosed on this day is 1 TWh (terawatt-hour) + α, which exceeds 130 trillion won in value. Since only about two companies worldwide have this scale, SK Innovation expects to reach the top three globally.

In May, President Moon Jae-in, who visited the United States, stopped by the SK Innovation electric vehicle battery factory near Atlanta to receive an explanation.

According to the company, electric vehicle battery production capacity will increase from 40 GWh per year to 85 GWh in 2023 and 200 GWh by 2025. The plan is to more than double capacity every two years. The target for 2030 is over 500 GWh. Recently, the company raised its initial target by deciding to establish a joint factory with Ford. Through this scale of economy, SK Innovation expects to generate profits quickly. Battery Business CEO Ji Dong-seop said, "We expect to achieve profitability this year based on EBITDA and generate 1 trillion won in 2023 and 2.5 trillion won by 2025."

SK Innovation will also expand lithium-ion battery separators (LiBS), a key battery material. Currently producing 1.4 billion square meters annually, ranking first globally, the company plans to triple this to 4 billion square meters by 2025. Kim Jun, SK Innovation CEO, said, "We will grow EBITDA to 1.4 trillion won by 2025 and develop this as a core green business."

While currently focusing on supplying electric vehicles, the battery business will expand its applications to include energy storage systems (ESS), flying cars, and robots. Additionally, the company plans to grow its battery metal recycling (BMR) and Battery as a Service (BaaS) platform businesses, which efficiently manage battery lifecycles. The BMR business, which reuses materials from spent batteries, can reduce carbon emissions by up to 70% compared to initial lithium mining. SK Innovation plans to start pilot production next year and aims for mass production domestically and internationally by 2024. By 2025, the company expects to recycle 30 GWh of batteries annually and generate 300 billion won in revenue from this business alone.

Previously, Carbon-Based Assets Accounted for 70%
Investing 30 Trillion Won to Achieve 70% Eco-Friendly Ratio

SK Group Chairman Chey Tae-won has emphasized that companies must play a leading role in solving environmental problems. Since profit-driven activities have significantly contributed to environmental degradation, companies equipped with technology and capital should take the lead in resolving these issues. He views responding to environmental problems not as an option but as a necessity, which will be a decisive factor in future corporate competitiveness. This background explains SK Innovation's bold declaration to transform its refining business, which was built by former Chairman Chey Jong-hyun and is a core area of the group, into a subsidiary business.

Looking at SK Innovation's tangible and intangible assets by business division, traditional carbon-based businesses such as petroleum, chemicals, oil exploration, and lubricants account for 70%. Although investments in battery-related fields have increased in recent years with new factories, battery and materials assets still represent only about 30%. To completely reverse this structure, SK Innovation plans to secure 30 trillion won over the next five years through external joint ventures (JVs), incentives, initial public offerings (IPOs), selling stakes in existing businesses, and asset efficiency improvements. This 30 trillion won investment is double the amount the company invested in the past five years.

SK Innovation Ulsan Complex view. Photo by SK Innovation

The battery business and oil exploration (E&P) business will be separated in consideration of market conditions. A physical division method is likely to be used as a way to increase the value of each business. SK Innovation is a business holding company within SK Group, with subsidiaries such as SK Energy (refining), SK Comprehensive Chemical (chemicals), and SK Lubricants (lubricants). The battery business, which is currently operated directly, will be spun off.

Kim Jun, SK Innovation CEO, said, "We will focus on the role of a holding company specializing in developing a green portfolio and discover second and third battery and separator businesses through R&D, new business development, and mergers and acquisitions in the eco-friendly business sector."

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