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LG Energy Solution raises $1b from green bond sales to finance battery projects

Sept. 19, 2023 - 15:15 By Moon Joon-hyun
An artist's illustration shows the proposed building for LG Energy Solution's battery production facility in Queen Creek, Arizona, with completion anticipated by 2025.(LG Energy Solution)

South Korean battery maker LG Energy Solution said Tuesday it has raised $1 billion worth of global green bonds to finance its global production facilities.

It marks the company's first foray into the global green bond market. Green bonds are bonds specifically designed to provide capital to industries and projects combating climate change, including batteries, an alternative to fossil fuels.

This $1 billion bond comprises two portions: $400 million set to mature in 3 years and the remaining $600 million designated for a 5-year term. They are priced at rates that are 100 and 130 basis points higher than the respective US 3-year and 5-year treasury bonds. This favorable pricing came in 40 basis points under LG Energy Solution’s initial forecast, showing robust investor confidence.

Receiving bids nearly five times the size of its base issue, 114 and 186 investors respectively chose the three-year and five-year bonds. Analysts point to the company's potential growth trajectory, reinforced by legislative incentives like the US Inflation Reduction Act, as a catalyst for such demand.

Financial rating agency Moody's assigned the company an SQS1 rating, recognizing the company's effective integration of ESG standards.

LG Energy Solution is directing the bond revenue towards its global battery projects. Last year, they invested six trillion won ($4.56 billion) in battery production, aiming for a 50 percent increase compared to last year.

It has also allocated three trillion won for an Energy Storage Solutions facility in Arizona with a 16-gigawatt hour target. These investments align with LG's goal to triple its ESS sales in five years.

As of June this year, LG Energy Solution reported cumulative order contracts that are expected to generate roughly 440 trillion won in sales.