South Korean battery maker LG Energy Solution (LGES) proudly announced that it has launched its first-ever global green bond worth $1 billion.
The press release noted that the total includes a three-year bond of $400 million and a five-year bond of $600 million.
Purpose
LGES raised $1 billion in its first global green bond to expand its global battery production and renewable energy projects. One of these projects is the joint venture it formed with Hyundai for a US battery factory.
For context, green bonds finance eco-friendly projects and aid firms in achieving their ESG targets.
As mentioned, the company sold two green bonds that amounted to a total of $ 1 billion. The three-year bond has +100 basis points (bps) yield, while the five-year bond has a +130 bps from the US.
Investor confidence
The bonds’ final issuance rates dropped by 40 bps from the original price estimates. It demonstrates “robust investor confidence” for the company, the Korea Herald noted.
True enough, Moody’s and S&P gave LGES a Baa1/BBB+ bond credit rating owing to its strong presence in the global battery industry.
“Echoing high expectations for the company’s growth potentials, including its active investment plans and the introduction of the Inflation Reduction Act (IRA), LG Energy Solution’s first-ever global green bond issuance attracted orders from 114 institutional investors on its three-year bond and 186 on its five-year bond, with the total order reaching five times the issuance size.”
LGES
Hyundai and LGES partnership
LGES will utilize the funds it raised from the bonds to boost its production network across the world. It could also aid the company in establishing a strong market presence in the US.
In fact, LGES and Hyundai’s joint battery factory is already underway in Georgia, with investment plans of more than $4.3 billion.
It also invested in a new battery factory in Arizona. It aims to boost total investments from just $1.4 billion to $5.5 billion because of the growing demand for electric vehicles. Apart from that, it also intends to expand its energy storage system business unit with a threefold increase in its global sales of residential storage systems.
LGES’ move to intensify its expansion projects will undoubtedly aid the company in achieving its global sales targets. Notably, its order backlog reached 440 trillion won ($332 billion) as of the end of June 2023.
