SK Innovation to liquidate 49% of SK Global Chemical for green transition

SK Innovation said Tuesday that it would sell off 49 percent of its petrochemical subsidiary, SK Global Chemical, as part of a strategy to unload carbon-intensive assets and focus its investments on green businesses. SK Innovation currently controls 100 percent of SK Global Chemical.

According to the South Korean battery and petrochemical giant, it selected JP Morgan as a financial adviser in November before making the decision.

“SK Global Chemical is reviewing a partnership with global strategic investors and setting up a joint venture is one of the options. To accelerate the Green Balance 2030 campaign based on a robust financial story, SK Innovation seeks to shore up funds for future growth and support SK Global Chemical to create synergies (with global partners),” an SK Innovation official said.

In October, SK Group Chairman Chey Tae-won highlighted the importance of creating a “financial story” for its affiliates, a business strategy to raise company values by expressing the company’s vision for the future through investment activities. Green Balance 2030 is an eco-friendly business management strategy pursued by SK Innovation.

By limiting the sell-off to 49 percent, SK Innovation will maintain management rights over SK Global Chemical.

SK Global Chemical is SK Innovation’s core subsidiary, having reaped 11.8 trillion won ($10.6 billion) in revenue and 458.3 billion won in operating profit in 2019. But its profitability deteriorated last year, with its revenue plunging to 8.4 trillion won. In the same year, the company suffered an operating loss of 53.4 billion won.

“SK Innovation, which is seeking an aggressive expansion into the electric vehicle battery business, has a huge amount of debt. Liquidating its stake in SK Global Chemical will allow the company to secure funds for the expansion and settlement money for LG Energy Solution,” an industry analyst said.

According to SK Innovation’s regulatory filing, as of the fourth quarter the company’s debt ratio stood at 149 percent. Of the 23 trillion won the company owed in total debt, 13.6 trillion won consisted of loans. Even if the company were to spend all its cash, loans worth 8.7 trillion won would still remain.

The analyst added that SK Innovation was likely to sell off stakes in other subsidiaries -- namely, SK Lubricants and SK IE Technology.

By Kim Byung-wook (kbw@heraldcorp.com)