BlueOval SK Kentucky Plant 1 by SK On and Ford Joint Venture. (Photo courtesy of SK On)

 

 

[Alpha Biz= Kim Jisun] SK On, the battery subsidiary of SK Innovation, and Ford's joint venture BlueOval SK announced on Wednesday that they will conduct a $3.4 billion (approximately 4.9 trillion KRW) capital reduction. This follows a $2.8 billion reduction announced on December 17, marking the second round of reductions. A capital reduction involves returning investment to shareholders while decreasing the company's capital base.

In the first round, both parties recouped 2 trillion KRW each. The total reduction for BlueOval SK amounts to 9 trillion KRW, reducing its capital from approximately 16 trillion KRW to around 7 trillion KRW. This decision aligns with the recent approval of a $9.6 billion loan by the U.S. Department of Energy (DOE) under the Advanced Technology Vehicles Manufacturing (ATVM) program. The loan offers favorable terms with interest rates comparable to U.S. Treasury rates.

SK On, alongside other major South Korean battery manufacturers, faces unprecedented challenges due to intensified competition from Chinese rivals and a slump in market demand. Industry analysts predict that all three leading South Korean battery companies will post operating losses for Q4 2024, with combined losses estimated to reach 750 billion KRW.

Concerns are mounting about further financial pressure as the second term of Donald Trump’s administration is set to introduce policies reducing subsidies for battery manufacturing, potentially exacerbating losses in Q1 2025 to exceed 1 trillion KRW.

LG Energy Solution has already announced a provisional Q4 2024 operating loss of 225.5 billion KRW. Analysts estimate that Samsung SDI’s Q4 losses will range from 100 to 200 billion KRW, while SK On may report losses between 200 and 300 billion KRW. The combined Q4 operating results for the three companies are expected to show a decline of approximately 1.35 trillion KRW compared to the 600 billion KRW profit recorded in Q4 2023.

 

 

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