SK Innovation E&S

[SK E&S] SK’s Stake in Plug Power Rose to 2 Trillion Won in Value in 5 Days after Its Additional Equity Purchase
SK’s stake in Plug Power rose to 2 trillion won in value in 5 days after its additional equity purchase

- Market expectations on collaboration to explore the Asian market increased share price of Plug Power by130% after SK became the largest shareholder of the U.S. company
- Plug Power announced it will enter the European hydrogen market with Renault Group in France by forming a joint venture
- SK has prepared a business model for differentiated hydrogen business learning from the experience in its LNG business over the past 10 years
- SK and Plug Power are thought to be the best strategic partners to each other to create synergy effects in their hydrogen business.
- SK made another successful investment after excellent investments in SK Materials, SK Siltron and ESR
 
Market expectations on potential growth of Plug Power are rising dramatically as shown in increase of its share price after SK and SK E&S became the largest shareholder of the energy company through an equity investment.

On January 12, Plug Power’s share price that had been rising since SK’s investment was announced closed at $66 per share, up 130% from $29 per share, the acquisition price per share. Consequently, the value of SK’s stake in Plug Power has more than doubled reaching over 2 trillion won and the market capitalization of Plug Power has risen to 34 trillion won, which is unprecedented growth recorded only in 5 days since SK’s investment.

Meanwhile, Plug Power and Renault Group in France announced on January 12 that they will create a joint venture to target the European market for small and medium commercial hydrogen-fueled vehicles. The two companies plan on building hydrogen fuel cell system and cutting-edge production lines for hydrogen-powered vehicles in France with an aim for the joint venture to take more than 30% of share in the European market for fuel cell-powered small and medium commercial vehicles.


Industry analysis suggests that investors are showing high expectation as transition to hydrogen economy is taking place not only in the U.S. but in Europe and Asia. Global investment banks such as Morgan Stanley and Barclays predicted SK and Plug Power are the best strategic partner to each other and can create significant synergy effects, and their collaboration will make them the leader in the Asian hydrogen market.
 
An official from SK said, “SK has long prepared for the hydrogen business to keep up with the global trend of environmental commitment and developed a thorough strategy for it. Investment decision on Plug Power was made after weighing considerations for a long time.”


SK E&S, a subsidiary of SK, has successfully integrated the LNG value chain from production to distribution and consumption for the past 10 years. Using the experience, the company plans on value chain integration in the hydrogen business which has a similar business structure to LNG to hold a dominant position in the Korean hydrogen market. In fact, SK E&S is the only Korean company that owns LNG terminals and gas fields. And therefore, it is considered to be best positioned for economical hydrogen production by using its own LNG infrastructure and to process carbon dioxide, which is created when hydrogen is produced, without harming the environment.
 
SK E&S also has partnered with Huadien, one of the Chinese three largest state-owned power companies, as well as ENN, China’s largest private LNG provider, and is the only foreign company that obtained a permit of operating two LNG terminals in China. The energy company aims to use the LNG infrastructure and network in China and Plug Power’s technologies to explore the Chinese market while cooperating with Vin Group, Vietnam’s largest private company that it owns equity in, in the commercial hydrogen vehicles business and power generation to take the leadership in the Asian hydrogen market.

SK announced a plan that SK E&S supplies 30,000 tons of by-product hydrogen* annually starting from 2023 while producing 280,000 tons of blue hydrogen** a year from 2025. The company had been negotiating with Plug Power to obtain key technologies in the hydrogen value chain. In fact, Plug Power had been offered to collaborate with by a number of leading companies in Korea and other countries and chose to partner with SK recognizing SK’s competencies in energy business and its wide Asian network. Plug Power also accepted SK’s participation in management, which is unusual for a tech company. 

The investment industry noted that SK has made another excellent investment in hydrogen business after its successful investments in SK Materials, SK Siltron and ESR, proving its well-established reputation as an investment specialist.

President of SK E&S and President of SK Hydrogen Business Task Force Choo Hyung-Wook said, “We believe SK’s hydrogen supply capability combined with Plug Power’s technologies to liquefy, transport and refuel hydrogen will help us integrate an economical and reliable hydrogen value chain.” He added, “SK has an experience to turn SK E&S which was a city gas company to a global LNG provider with more than 1 trillion won of pre-tax profits. Based on the experience, SK will continue its success story in the hydrogen business.”

* By-product hydrogen: Hydrogen created additionally from processes of petrochemical plants. By-product hydrogen has often been gone wasted without being recycled due to difficulties of producing and distributing it.
** Blue hydrogen: Blue hydrogen is nearly pure hydrogen created by using CCUS (Carbon Capture Utilization and Storage) to capture and store carbon dioxide emission produced in the process of producing hydrogen using LNG reforming