LG Chem and LG Energy Solution Secure Comprehensive Funding to Dominate Global Battery Market

LG Energy Solution Raises 3 Trillion Won Through Stake Securitization and Corporate Bond Issuance
Secures Global Production Capacity... Invests Funds in North America Joint Venture Contribution

LG Chem and LG Energy Solution have embarked on aggressive fundraising efforts to strengthen their dominance in the global battery market. LG Chem is leveraging its stake in its subsidiary LG Energy Solution to raise approximately 2 trillion KRW, while LG Energy Solution plans to issue corporate bonds worth up to 1 trillion KRW. The raised funds will be invested in local joint ventures related to batteries in the United States and in the materials sector.

According to the investment banking (IB) industry on the 23rd, LG Chem is pursuing about 2 trillion KRW in funding by selling around 2% of its LG Energy Solution shares or issuing exchangeable bonds (EB). This involves utilizing a portion of the 81.84% stake LG Chem holds in LG Energy Solution for investment and operational capital. An industry insider stated, "LG Chem is reportedly seeking friendly investors who will not sell shares externally or disrupt business partnerships."

LG Energy Solution, the subsidiary, plans to issue corporate bonds worth up to 1 trillion KRW. KB Securities, NH Investment & Securities, and Mirae Asset Securities were selected as lead managers and conducted a demand forecast targeting institutional investors the previous day. The initially planned issuance amount was 500 billion KRW, but with a massive inflow of 4.72 trillion KRW in demand, the bond issuance is expected to be increased to 1 trillion KRW. This is the first corporate bond issuance since LG Energy Solution was spun off from LG Chem and represents the largest single-company issuance within the LG Group this year. A lead manager commented, "Most institutional investors bidding for LG Energy Solution bonds offered interest rates below the market average (average rate by private bond rating agencies), indicating a high likelihood that LG Energy Solution will increase the bond issuance to 1 trillion KRW under favorable conditions."

The reason LG Chem and LG Energy Solution are raising large-scale funds is due to increased capital demand as they expand investments in secondary batteries and related materials. LG Chem plans to invest 10 trillion KRW in the secondary battery sector, including battery materials, over the next five years. This aims to establish a global production system considering the U.S. Inflation Reduction Act (IRA) and Europe’s Critical Raw Materials Act (CRMA). In the cathode material sector, production facilities will be secured primarily in Korea, the U.S., Europe, and China, with production capacity targeted to increase from 120,000 tons this year to 470,000 tons by 2028.

As an execution plan, LG Chem will invest 4 trillion KRW to build a cathode material plant with an annual capacity of 120,000 tons in Clarksville, Tennessee, USA. Additionally, construction of cathode material plants is being considered in Germany, Hungary, and Poland. Currently, LG Chem is investing 1.2 trillion KRW in building a precursor plant with China’s Huayou Cobalt and in Saemangeum.

LG Energy Solution plans to use the funds raised from bond issuance to invest in three battery joint ventures in the North American region. It will inject capital into NextStar Energy Inc., established in Ontario, Canada, with multinational automaker Stellantis. NextStar Energy is established with LG Energy Solution holding 51% and Stellantis 49%. The equity acquisition amount is about 1.8 trillion KRW, to be contributed in installments by March 2025.

In Ohio, USA, LG Energy Solution will jointly invest with Japanese automaker Honda to establish the Honda-LGES JV (tentative name). LG’s stake will be 51%, with an investment amount of approximately 2.4 trillion KRW, contributed in installments by 2027. Additionally, LG Energy Solution and Hyundai Motor Group will establish ‘LGES-HMG Battery’ (tentative name) with a 50-50 investment ratio. The investment amount is about 1.5 trillion KRW, to be contributed by February 2028. The expected total investment in the three North American joint ventures amounts to approximately 5.7 trillion KRW.

An IB industry insider said, "LG Chem can actively utilize its LG Energy Solution shares to raise large-scale funds, and LG Energy Solution has significantly reduced its borrowings after listing, improving its financial capacity. The two companies are expected to continue increasing fundraising through various methods as they expand global battery investments."

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