As an independent subsidiary, LG Energy Solution is expected to receive strategic investment from major original equipment manufacturers and attract more funds from the initial public offering (IPO) to expand its battery production capacity.
LG Energy Solution , a wholly-owned subsidiary of LG Chem , was formally established to “provide diversified energy solutions.” Jin Zhong, the former president of LG Chem’s battery business division, is now the CEO.
It is reported that LG New Energy is building a global operating system with a total of 22,000 employees worldwide. It has production bases in Ochang and Daejeon, South Korea; Michigan, US; Nanjing, China; Wroclaw, Poland. Daejeon, South Korea, Troy, Nanjing, China and Frankfurt, Germany operate technology R&D centers.
LG Energy Solution has a registered capital of 100 billion won, and its main business will include car batteries, energy storage systems (ESS), and small batteries for smartphones and laptop computers.
Its sales target is to reach 13 trillion won (about 77.2 billion yuan) this year, and 30 trillion won (about 178.3 billion yuan) by 2024. At the same time, the annual production capacity will be increased from 120GWh to more than 260GWh by 2023.
However, LG Chem has been in a capacity expansion mode, and its net debt has now reached 8 trillion won (about 47.5 billion yuan), and its debt-to-equity ratio has exceeded 100%.
Due to limited funds, it is impossible to concentrate investment in other fields such as petrochemicals, leading to imbalances in investment among business departments, and deterioration of financial structure and business competitiveness. Therefore, LG Chem believes that the moment of structural profitability in the power battery field is a good spin-off opportunity.
As of September this year, the cumulative sales of LG Chemical’s battery business were 8.2278 trillion won (approximately 48.9 billion yuan), which was the same as last year’s annual sales (8.3502 trillion won).
According to foreign media, LG Chem has a backlog of 150 trillion won (approximately RMB 891.4 billion) in its electric vehicle battery business, and it will spend approximately 3 trillion won (approximately RMB 17.8 billion) on facility expansion each year.
Some analysts pointed out that as an independent subsidiary, LG Energy Solution is expected to receive strategic investment from major original equipment manufacturers and attract more funds from initial public offerings (IPO) to expand its battery production capacity.
Li Changshi, director of operation and management of the original battery business division, will serve as the chief financial officer. He will lead the listing of the new company. Analysts predict that, given that the new battery company needs to immediately prepare capital to invest in plant construction, etc., it will advance its IPO in the second half of next year as soon as possible.
LG Chem has stated that in order to ensure its absolute shareholding ratio, the shareholding ratio of LG New Energy will remain at 70% to 80% in the future. Media reported that Tesla is seeking to acquire up to 10% of LG Energy Solution.
Although there are opportunities to attract outside funds, the remaining problems such as battery fires and legal proceedings have also brought its challenges to LG Chem
This year, General Motors announced the recall of nearly 69,000 Bolt, and Hyundai Motor announced the recall of nearly 25,600 KONA EVs, all of which point to batteries produced by LG Chem.
CATL has a chance to step-in and take away part of the market share. CATL’s electric vehicle battery usage reached 19.2GWh, accounting for 23.1% of the total 83GWh, exceeding LG Chem’s 18.9GWh (22.9%).
Technology investment is crucial to the success of LG Energy Solution.
LG Chem will develop a module battery pack integration platform MPI (Module Package Integration Platform) , and gradually transition to the elimination of modules, directly composed of battery cells. Such a platform will reduce battery costs by 30% and increase energy density by 10%. At the same time, LG Energy Solution aims to accelerate the development of new-generation battery technologies such as all-solid-state batteries and lithium-sulfur batteries.
It is worth mentioning that LG Chem and SKI’s litigation schedule has been delayed repeatedly, and the total number of lawsuits involved by both parties has exceeded 10. Industry insiders said that LG Chem should eliminate the risks in the litigation as soon as possible to ensure that the new company is in a better position to obtain investment funds.
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