SK Group, South Korea’s third-biggest firm, has vowed to finish all new oil and gasoline investments abroad and slash its carbon emissions by two-thirds, because it plots a metamorphosis away from fossil fuels.
The U-turn by one Asia’s high producers of oil, laptop chips and electrical automobile batteries is a victory for worldwide traders and environmental activists, who’ve sharpened their criticism over how Asia’s corporates reply to local weather change.
The transfer, spearheaded by SK’s chairman and largest shareholder Chey Tae-won, can also be emblematic of how the acquisitive Korean group is stepping up its problem to the nation’s main chaebol, the family-owned conglomerates that dominate the financial system.
Mr Chey has ordered a sweeping readjustment of SK’s portfolio to be accomplished inside the subsequent three years. This may embody carving off carbon-intensive companies and doubling down on the corporate’s multibillion-dollar bets throughout EVs, laptop chips, biotechnology and renewable power.
“The period of competing for scale is now behind us . . . We need to be one of the best firm within the ESG realm,” Jang Dong-hyun, president of SK Holdings, which helps oversee SK’s 125 associates, informed the Monetary Instances in an interview.
SK’s pivot is driving M&A exercise and capital expenditure. In current weeks, the group bought Intel’s memory business for $9bn and spent $1bn to buy South Korea’s largest waste disposal firm. SK Innovation, the oil refining unit more and more centered on EV batteries, is spending $8bn constructing factories to serve carmakers within the US, China and Europe.
James Lim, an analyst at US hedge fund Dalton Investments, mentioned the technique was “bearing fruit” within the minds of some worldwide traders. “SK is a number of steps forward of most different chaebol by way of future-oriented portfolio restructuring and ESG investments,” he mentioned.
Mr Jang mentioned the adjustments had been “inevitable”.
Rival Korean firms, together with Samsung and Kepco, the state-backed power group, have been panned by European pension funds and environmental teams for backing the coal industry.
Mr Chey, 59, has already overseen speedy progress on the family-owned SK Group since taking on the corporate after the demise of his father in 1998, through the Asian monetary disaster.
SK now generates greater than half of its revenues abroad, employs 100,000 individuals and has made Mr Chey one in every of South Korea’s richest males.
SK’s group-wide belongings have elevated seven-fold to Won225.5tn ($202bn) final 12 months below Mr Chey’s management. Gross sales have quadrupled to Won139tn and internet revenue rose 80 instances to Won8tn.
One business chief described the corporate as a “kingdom constructed on M&As”.
The newest deal spurt has prompted recommendations that SK is modelling itself on SoftBank, the Japanese telecoms group turned tech investor.
SK bristles on the SoftBank comparability, insisting that its M&A technique is centred on shopping for firms that enhance its current companies and carving off non-core models.
“Controlling the entire worth chain brings numerous advantages as you’ll be able to create synergies by means of co-operation between models . . . It will increase your understanding of the entire enterprise or business, due to this fact lowering the dangers of failures,” mentioned Mr Jang.
SK lacks the worldwide model recognition of rivals akin to Hyundai and LG. However the newfound consideration has revived uncomfortable questions over household management, corruption, political ties and mental property theft.
Mr Chey was convicted of accounting fraud and misappropriating firm funds in 2003 and 2014, respectively. His stints behind bars were cut short and he later obtained presidential pardons. SK declined to remark, noting accomplished authorized processes.
The corporate at the moment stands accused of illegally acquiring sensitive EV technology from Korean competitor LG Chem, in a dispute that threatens its $2.6bn funding in constructing factories in Georgia, the most important single funding within the US state’s historical past. SK denies the claims.
The corporate has gained reward from some traders, together with Mr Lim, for transferring forward of different chaebol in abandoning a complex web of cross-shareholdings for a extra standard holding firm construction, in addition to bringing in outdoors, impartial administrators.
For some, nonetheless, the reputational stain from previous wrongdoing stays.
Kim Woo-chan, an economics professor at Korea College, mentioned: “The quantity of [alleged] fraud was a number of instances larger than Enron’s and Mr Chey was imprisoned twice for critical monetary crimes however he nonetheless controls the group — this is able to be unthinkable within the west.”
SK Group charts a turbulent rise from the ashes of Korean warfare
Basis of Sunkyong Textiles
Acquisition of Korea Oil (now SK Innovation), South Korea’s high refiner
Acquisition of Korea Cell Telecom Service (now SK Telecom), South Korea’s main cellular operator
Acquisition of Hanaro Telecom (now SK Broadband), a South Korean broadband supplier
Acquisition of Hynix (now SK Hynix), the world’s second-largest DRAM producer
Acquisition of OCI Supplies (now SK Supplies), a South Korean semiconductor materials firm
Acquisition of LG Siltron (now SK Siltron), a South Korean silicon wafer producer
Acquisition of AMPAC, a US pharmaceutical contract producer
Acquisition of KCFT (now SK Nexilis), the world’s largest battery copper foil maker
Acquisition of EMC Holdings, South Korea’s largest waste disposal firm