LG revs up Asia's green-car capital engine | Reuters

A Tesla electric car drives past a crossing in Shanghai, China March 9, 2021. Picture taken March 9, 2021. REUTERS/Aly Song – RC2DRM9ZSZL4

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HONG KONG, Jan 11 (Reuters Breakingviews) – Asia’s capital markets are ready to fire on all cylinders for the electric-car boom. LG Chem (051910.KS) is starting the regional frenzy with its $10.7 billion battery spinoff. For now, investors have good reasons to go along for the ride.

LG Energy Solution’s upcoming Seoul market debut puts it in pole position to be Asia’s biggest initial public offering for 2022. The unit, which supplies Tesla (TSLA.O) and others, is on its way to pricing shares at the top of the range, or 300,000 won ($251), according to financial publication IFR, for a valuation of some $60 billion read more . Only $200 billion Contemporary Amperex Technology, or CATL (300750.SZ), would be a bigger pure-play battery maker.

More such deals are being powered up as Asian supply chains scramble to keep up with surging electric-vehicle sales. Battery demand is forecast by Bank of America analysts to more than quadruple to 1,556 GWh by 2025. High upfront research and development costs, as well as rising prices for lithium, nickel and cobalt are further stretching balance sheets.

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Following LG closely will be compatriot SK On, which is gearing up to raise $2.5 billion in a pre-IPO funding round this year, local media say. The company recently unveiled read more an $11.4 billion joint investment plan with Ford Motor (F.N) to boost battery capacity in the United States.

In China, the world’s biggest electric-vehicle market by sales, CATL is targeting a $7 billion private share placement as smaller China Lithium Battery Technology eyes a $1 billion Hong Kong offering. Overall, at least $32.5 billion of equity raisings from Asian electric-vehicle companies are in the pipeline, IFR estimates. Sony is among the many others whose aspirations in the industry read more also are bound to need money.

Valuations are turbo-charged. CATL, for instance, trades on a frothy 64 times forecast 2022 earnings, per Refintiv, while Tesla’s 100 times multiple sets a breathtaking pace. And unlike in Chinese technology, where recent crackdowns have been a drag on growth prospects, the worldwide race to net zero means governments are fueling fund managers in search of greener options. For Asia’s electric-vehicle sector, it should be easy to fill up the capital tanks.

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– South Korea’s LG Energy Solution on Jan. 3 opened books to investors to raise up to 12.8 trillion won ($10.7 billion) in the country’s largest initial public offering.

– The company will sell 34 million new shares at 257,000 won to 300,000 won per share. Parent LG Chem also will sell 8.5 million secondary shares. At the top of the price range, LGES will be valued at 70.2 trillion won ($58.5 billion) on a fully diluted basis.

– The shares are expected to price on Jan. 14.

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Editing by Jeffrey Goldfarb and Katrina Hamlin

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