- SK E&S announced its goal of becoming a “major global green energy company” with corporate value of 35 trillion won by 2025, releasing its “Financial Story.”
Choo Hyung-wook, CEO and President of SK E&S, addressed the media at “SK E&S Media Day 2021” on September 1 at Four Seasons Hotel in Jongno-gu, Seoul and said, “The company will lead the future global energy ecosystem by building a differentiated “green portfolio” in its 4 core business areas.”
- Choo Hyung-wook, SK E&S CEO and President, held his first media day as president and presented the company’s “future growth story”
- The company aims to produce 280,000 tons of hydrogen, 7GW of renewables and 10 million tons of green LNG with corporate value of 35 trillion won by 2025
- SK E&S continues to strive for ESG management by introducing “carbon neutral” LNG to Korea for the first time from 2025
- The company will use CCUS technology in its “end-to-end carbonless solution” to remove CO2 in the whole processes of LNG production and hydrogen production, namely “Gas to H2”
In its first press conference since Choo was appointed president, the energy company unveiled its “Financial Story” outlining its future growth plan for the first time. The company’s “Financial Story” represents SK Group’s unique management strategy to establish trust and consensus with different stakeholders including customers, investors and society; it articulates the company’s growth story that tells mid-and long-term visions and specific action plans along with its financial targets such as revenues and operating profits.
Choo Hyung-wook, CEO and President of SK E&S:
SK E&S wasn’t complacent about its position as Korea’s leading city gas provider, set its sights on LNG business that everyone deemed impossible to be successful in Korea, and became Korea’s first private company that achieved completion of the country’s largest LNG value chain.
“SK E&S’s “Financial Story” began with commitment that we had not to turn a blind eye to climate change and crisis anymore as an energy company,” he added.
SK E&S’s “Financial Story” contains its plan to build a differentiated “green portfolio” driven by its 4 core business-hydrogen, renewables, energy solutions and green LNG- and its idea of growing more competitive to become a “major global energy company” in the future.
First, the energy service company presented a vision of capitalizing on its capability for LNG infrastructure and the value chain to evolve as the “the world’s leading hydrogen company”. To achieve this goal, it plans to increase its annual hydrogen supply capacity to 280,000 tons-30,000 tons of liquefied hydrogen and 250,000 tons of blue hydrogen- by 2025.
For renewables, the company provided a blueprint for how it would grow into a “major global investor in renewable energy” that would own 7GW of renewable energy and 1.2 million tons of carbon credits by 2025. Currently, SK E&S is Korea’s largest private renewable energy provider, developing and operating renewable energy business with a capacity of 2.5GW including 200MW of floating solar power in Saemangeum.
The company is also working on active projects on renewables linked to obtain overseas carbon credits in countries such as Vietnam and India.
Energy solution is one of the areas expected to achieve strong growth in the future. SK E&S declared its plan to become a “global top-tier” company in the sector. In January, the company acquired Busan-JungKwan Energy that directly sells heat and electricity to about 30,000 households at JungKwan New Town in Busan.
Using the acquired energy provider as a test bed, SK E&S is building the best energy solution platform. It also aims to become a global top-tier energy solution provider by 2025 by soon acquiring a major grid energy solution provider in the U.S.
Lastly, for LNG business, the company has developed ambitious plans to go greener. The plans include Korea’s first supply of “carbon-neutral LNG”(1.3 million tons) produced by CCS technology by 2025 and application of CCS technology to the entire value chain. Another plan is to grow into a major global LNG provider that will supply 6 million tons and 10 million tons of LNG by 2023 and 2025 respectively.
“The reason SK E&S can become a major global green energy company is that it has a unique green portfolio,” explained Choo.
The company’s status as Korea’s No.1 LNG provider makes it more competitive in clean blue hydrogen sector, and growth in hydrogen business increases demand for LNG, leading to expansion of green LNG business. Renewable Portfolio Standards (RPS) required for LNG power generation boosts renewable energy business, and large-scale renewable energy projects accelerate transition to green hydrogen, allowing energy solutions, that optimize this process, to play a larger role.
The CEO said on the press conference that the company’s management would be committed to building a green portfolio where the 4 core business areas are the pillars and they create synergy effects.
Especially, SK E&S aims at taking the lead in building Korea’s hydrogen ecosystem as it sees hydrogen as a green solution to renewable intermittency and to overcoming limitations of electric vehicle batteries.
SK E&S is the subsidiary of SK Group in charge of implementing the group’s vision for hydrogen business and Choo is also the president of “Hydrogen Business Task Force”, an organization dedicated to the group’s hydrogen business. Earlier, SK Group announced its plan to invest roughly 18 trillion won by 2025 in building a value chain that encompasses production, distribution and consumption of hydrogen.
The company has a strategy designed to contribute to achieving carbon neutrality in Korea and booming Korean hydrogen market by producing and supplying by-product hydrogen and blue hydrogen in stages until the green hydrogen technology will become mature and be economically viable.
In the first stage, the company plans on completing the world’s largest hydrogen liquefaction plant with an annual capacity of 30,000 tons within SK Incheon Petrochemical Complex by 2023. The second stage is to produce 250,000 tons of blue hydrogen a year at a site adjacent to Boryeong LNG Terminal by 2025 by using CCUS technology to remove CO₂in an eco-friendly way, and the company has already began the preparation for this stage.
In addition to clean hydrogen production, SK E&S plans on constructing hydrogen fueling stations for distribution as well as hydrogen fuel cell power plants, and on facilitating increased use of hydrogen in the mobility sector including hydrogen-fueled vehicles and drones to lead in the era of the hydrogen economy. The first step towards achieving this goal is to build about 100 hydrogen fueling stations across the country by 2025.
By using the win-win fund, the energy provider is also supporting R&D of promising startups in hydrogen applications such as liquefied hydrogen-powered drones to enable them to commercialize their products as early as possible.
SK E&S will cooperate with Plug Power, an American global hydrogen provider, to explore markets in Asia including China and Vietnam. Earlier this year, SK and SK E&S invested 1.8 trillion won to purchase about 10% of shares of Plug Power, becoming the largest shareholder of the hydrogen company.
SK E&S has also partnered with Huadien, one of the Chinese three largest state-owned power companies, to expand its hydrogen business in China as well as has been in discussion with the Vietnamese government for cooperation in hydrogen business.
At the press conference, SK E&S said it would take the initiative in introducing the world’s best CCUS technology by signing international licensing agreements, acquiring technology providers and developing its own technology to promote ESG (Environment·Social·Governance) management.
This means the company will adopt an “end-to-end carbonless solution” designed to remove CO₂in an eco-friendly way by using CCUS technology in the whole value chain of “Gas to H2” which covers from green LNG production to clean hydrogen production.
The adoption of the solution was decided based on the belief that green LNG production using CCS technology is a realistic solution to achieving carbon neutrality.
In the energy transition to carbon neutrality, LNG is recognized as a “complementary energy source” that can be coupled with renewables because it can help address intermittency of renewables in an eco-friendly way when use of renewables in power generation needs to be increased.
LNG generates less CO2 compared to other fossil fuels and can be integrated into power system directly when necessary as it can be readily available. Combined with CCUS technology, green LNG production without CO2 emission can help achieve the “twin ideas” of reliable performance in energy supply and carbon neutrality according to SK E&S.
While the global CCS capacity of 26 projects currently operating commercially stands at 40 million tons a year, SK E&S plans to conduct the project on Barossa-Caldita gas fields in Australia as its first “Gas to H2” project. Under the project, those gas fields in Australia will capture all CO2 emission produced at underground reservoirs, and sequester and store it at nearby closed gas fields, which will make the LNG business more environmentally friendly.
Green and low-carbon LNG produced by using CCS technology is expected to be provided for the blue hydrogen production process, contributing to boost Korean hydrogen ecosystem. The energy company decided to use 1.3 million tons of low carbon LNG produced at Barossa-Caldita gas fields annually as a raw material to produce blue hydrogen in Korea. The company said CO2 generated in the process of blue hydrogen production will be stored in the closed Australian gas fields permanently through CCUS.
“CCUS technology is a key platform technology to achieve carbon neutrality,” said Choo. “As a member of the ecosystem, SK E&S will not only develop the gas fields in Australia in the most eco-friendly way possible, but produce hydrogen in an equally eco-friendly way so that it can reduce CO2 emission significantly,” he continued.
In addition, for the “social” pillar of ESG, SK E&S will strive to identify local regeneration models and build various social safety nets to achieve the goal of “Be with SK E&S, and your local community will be revived.”
For “governance” pillar, the company adopted the outside director system early, although it is an unlisted company, and created an ESG committee last June under the board of directors, the highest decision-making body, to place the BOD at the heart of the responsible corporate governance structure.
By implementing a growth strategy supported by a green portfolio primarily consisting of 4 core business areas, SK E&S plans to drive up its corporate value to 15 trillion won by 2023 and 35 trillion won by 2025 from 7 trillion won today. It also targets to increase its revenues and EBITDA, which recorded 6 trillion won and 700 billion won respectively last year, to 13 trillion won and 2.8 trillion won respectively by 2025.
“SK E&S was Korea’s leading city gas provider and became Korea’s largest LNG provider that completed an LNG value chain, which shows the company has risen to a new challenge, done the impossible and made the impossible possible,” said Choo.
“Our “Financial Story” is not just a declarative statement. SK E&S will strive to do elaborate preparation and fully implement its plans to become a “major global green energy company” that is a modest member of the ecosystem and is well-prepared for the energy transition era,” he emphasized.