Sebang Group’s game: Two birds with one stone: entry into the North American ESS market and succession. > News

Sebang Battery, a core affiliate of Sebang Group, is accelerating its efforts to target the North American ESS market with its subsidiary Sebang Lithium Battery (SLB). This project, which will establish a base in Ohio and supply battery modules to LG Energy Solutions' power grid ESS platform, is a large-scale project expected to generate cumulative sales of approximately 1.8 trillion won by 2028. It is clearly a positive sign that a stable source of demand has been secured amidst the trends of the times such as the expansion of AI data centers and the advancement of power grids. However, in this process, the financial burden on the parent company is increasing, as Sebang Battery provides payment guarantees worth 191 billion won to its subsidiaries and invests large amounts of funds in paid-in capital increase, raising market concerns. In particular, the fact that the supply chain was hastily reorganized due to the departure and bankruptcy of existing partners suggests the possibility of unexpected variables occurring in the future production stabilization process.

Sebang Lithium Battery's financial status is in contrast to the news of its brilliant orders. Since its establishment, it has achieved external growth thanks to the parent company's full workload and fund infusion, but last year, it recorded an operating deficit and net loss, and a red light has been turned on in the profitability indicator. In the process of reducing the proportion of work done by the parent company and gaining independent competitiveness, the burden of fixed costs increased rapidly, which soon led to a deterioration in financial soundness bordering on capital erosion. To make matters worse, the prevailing assessment is that the subsidiary's own financing ability has reached its limit as the guarantee limit provided by Sebang Battery has been fully exhausted. As a result, Sebang Lithium Battery's growth has structural weaknesses that make it difficult to sustain without the parent company's guarantee, which may also pose a potential risk to the shareholder value of the parent company Sebang Battery.

Aside from financial risk management, Sebang Group is carrying out a very thorough succession process centered on the third-generation owner, Executive Director Lee Won-seop. E&S Global, located at the top of the governance structure, has established an 'accounting firewall' that blocks the performance volatility of subordinate affiliates from being transferred from the owner to the corporation by using an accounting technique called 'cost method'. In addition, the owner family directly participated in Sebang Lithium Battery's paid-in capital increase to defend its control over the subsidiary, while at the same time taking strategic steps to optimize succession costs by targeting a time when the subsidiary's per-share value was low. This can be interpreted as a high-level strategy to stabilize management rights, such as controlling the group through the unlisted company E&S Global, and at Sebang Battery, a key affiliate, Executive Director Lee Won-seop resigned from his position as an executive director and became an unregistered executive, cleverly avoiding the National Pension Service's surveillance network.

Meanwhile, Sebang Group is also working to improve its corporate image and fulfill its social responsibilities. Through the Sebang Eui-sun Foundation, a social welfare corporation, we are carrying out the 'Sebang Learning Center' project for low-income families with multiple children, and beyond improving the residential environment, we are contributing to reducing the educational gap for future generations. These social contribution activities are interpreted as an intention to strengthen the group's ESG management and convey a positive corporate philosophy to external stakeholders, including the National Pension Service. However, ensuring actual management transparency so that these good deeds are not seen as a means to cover up governance issues or financial risks within the group will be a key task facing Sebang Group in the future.