LG Energy Solution moves towards IPO

LG Energy Solution has applied to the Korea Exchange for preliminary approval of an IPO. The company is also taking a stake in the Australian battery materials supplier Queensland Pacific Metals (QPM).

First, on the South Korean company’s stock market ambitions: preparations are in high gear at LG Energy Solution (LGES) to hit the trading floor this year. Both the company and the South Korean stock exchange have now announced the receipt of the application for approval for the stock market debut – but without going into detail about the value of the planned share issues.

This is said to be between 10 and 12 billion dollars. Reuters refers to information from the International Financing Review, IFR for short, which in turn relies on people “close to the business”. This would make LG Energy Solutions’ stock market debut the largest IPO in South Korea. LGES is said to want to use the proceeds from the IPO to ensure its competitiveness and expand its facilities to respond to growing demand for electric vehicles.

According to analysts, the funds could be used in particular to invest in battery production in the United States. In March, LGES had announced plans to invest more than $4.5 billion (just under €3.8 billion) in battery production in the US by 2025. Specifically, production capacity in the USA is to increase by 70 GWh to 110 GWh. At least two new factories are planned in this context. The investment plans in the USA will benefit from the 1.8 billion US dollars that LG will receive in the course of the out-of-court settlement with its South Korean competitor SK Innovation in the United States.

Separate from the IPO plans, LG Energy Solution has a 7.5 per cent stake in Queensland Pacific Metals (QPM), an Australian-based supplier of battery materials. Another 3.2 per cent of QPM will be acquired by Posco. Both South Korean companies have also signed seven-year binding offtake agreements with QPM for a total of 10,000 tonnes of nickel and 1,000 tonnes of cobalt per year from 2023. Of these, LG Energy Solution will take 7,000 tonnes of nickel and 700 tonnes of cobalt – and Posco the rest.

According to the Korea Herald, LG Energy Solution, the battery division of LG Chem that was spun off at the end of 2020, paid 12 billion won for the stake, the equivalent of just under 9 million euros. Among other things, QPM is pushing ahead with the so-called Townsville Energy Chemicals Hub project, which aims to process high-grade ore imported from New Caledonia to produce nickel and cobalt sulphate from 2023.

LG manufactures battery cells in production facilities in South Korea, the USA, Poland and China. In addition, the Korean company will act as a joint venture partner of General Motors and will soon start up a first production plant in Lordstown in the US state of Ohio. A second plant has been announced for Spring Hill in the state of Tennessee.

The sales curve of the young LG Chem subsidiary currently knows only one direction: upwards. In the first quarter of 2021, the company achieved record sales and profits. Sales amounted to the equivalent of 3.14 billion euros, an increase of 88 per cent over the same period last year and 3 per cent over the fourth quarter of 2020. Profit was the equivalent of €252 million (compared to -€38 million in Q1 2020, €115 million in Q2 2020, €125 million in Q3 2020 and -€325 million in Q4 2020). Given an operating margin of 8.0 per cent, the group’s recently separated division presented itself highly profitable from January to March. LG Energy Solution accounts for 44 per cent of LG Chem’s total sales, according to the financial statement.

With reporting by Cora Werwitzke, France.

reuters.com (IPO), , koreaherald.com, qpmetals.com.au (PDF)