SK Innovation set to finalize spin-off plan

South Korea’s top oil refiner SK Innovation said its plan to spin off its Incheon refinery complex on the country’s west coast, plus the oil trading division, should be finalized at a shareholder’s meeting in May.
SK Innovation said its board of directors endorsed a plan on May 9, to spin off the Incheon complex and the oil trading segment from SK Energy, its fully owned subsidiary, on July 1, 2013. Under the plan, the two groups will be fully owned subsidiaries of SK Innovation. The two new companies would not be publicly listed.
“The plan will be finalized at a shareholders’ meeting slated for May 24,” said SK Innovation spokesman Yoo Jung-Min, adding there should be no problem in winning their approval.
“The purpose of the spin-off is to cope with new business environments, such as [the] global economic slump and deepening competition,” he said.
Once the spinoff is completed, SK Incheon Petrochemical will focus on the production of paraxylene, a chemical used on a large scale for the manufacture of terephthalic acid for polyester. SK Trading, meanwhile, will engage in export and import of petrochemical products and crude oil. The paraxylene plant will have a capacity of 1.3 million metric tons a year by 2014.
SK Innovation’s petrochemical unit is SK Global Chemical, but the investment for the PX plant will come from the petroleum unit, SK Energy, which controls the Incheon complex since its acquisition of the Incheon Oil Refinery in 2007.
SK Energy has another refinery complex at Ulsan on the southeastern coast. It has five crude distillation units (CDUs) in Ulsan with a combined capacity of 840,000 barrels per day (bpd) and two CDUs in Incheon with 275,000 bpd, giving it a total refining capacity of 1.115 million bpd.
As of January 1, 2011, SK Energy was renamed SK Innovation and the petroleum and petrochemical businesses were spun off into wholly owned subsidiaries — SK Energy and SK Global Chemical. SK Lubricants was later turned into another wholly owned subsidiary. If the current plan goes through, there would be five total subsidiaries.
Meanwhile, credit rating agency Moody’s Investors Service said the plan had no immediate impact on SK Innovation’s Baa2 rating and stable outlook.
“The reshuffling will have little impact on SKI’s business and financial profiles, because SKI will maintain its complete ownership of all the entities…” Mic Kang, Moody’s vice president and senior analyst, said.
(May 10, 2013)