SK On Issuer Summary

Report date: 2026-05-15
Issuer: SK On Co., Ltd.
Relevant debt layers: SK On operating credit; SK Battery America, Inc. guaranteed senior unsecured green notes; SK Innovation-related support and guarantee context where disclosed
Primary evidence cut-off: SK Innovation Q1 2026 financial results release dated 2026-05-13; SK Innovation FY2025 results release dated 2026-01-28; SK Battery America offering circulars dated 2024-01-16 and 2026-01

1. Business Snapshot and Recent Developments

SK On Co., Ltd. ("SK On") is a lithium-ion battery manufacturer for EVs and ESS within South Korea's SK Group / SK Innovation group. It was spun out from SK Innovation's battery business in 2021 as a standalone company, and supplies battery cells to automakers and energy storage system customers through a production network in the United States, Europe, China, and South Korea. This report focuses primarily on SK On's operating credit profile. Foreign-currency notes seen under SK Battery America, Inc. ("SKBA") or SKBTAM are addressed separately in the bond-structure section. In particular, SKBA's 2027 and 2029 green notes carry unconditional and irrevocable guarantees from Kookmin Bank. As long as those guarantees remain effective, the primary credit risk of those securities differs from SK On's standalone credit risk.

In one sentence, SK On is a strategic battery manufacturer deeply embedded in the North American and European battery supply chain for non-Chinese OEMs, but it is currently an issuer whose credit assessment depends heavily on demonstrated execution, given slowing EV demand, changes in customer plans, low utilisation, capex burden, rising borrowings, and JV restructuring. Its importance within SK Group, US local production, relationships with major OEMs, and expansion into ESS / BESS support the credit floor. At the same time, the battery business reported an operating loss for FY2025 and remained loss-making in 1Q 2026. Therefore, treating SK On simply as a "growth-industry battery credit" would miss the fixed-cost burden, impairments, capital structure, and guarantee structure.

2025 was a year in which business restructuring and credit impairment surfaced at the same time. According to SK Innovation's FY2025 results release dated 2026-01-28, the company reported FY2025 revenue of KRW80.30 trillion and operating profit of KRW448.1 billion, but its full-year pre-tax loss widened to KRW5.82 trillion. The main driver was battery business-related impairment: SK On recognised approximately KRW4.2 trillion of asset impairments, including those related to the restructuring of the BlueOval SK joint venture with Ford Motor Company. The company describes this impairment as a non-cash accounting adjustment with no direct cash-flow impact, but it cannot be ignored in credit analysis. A large impairment indicates that the earnings assumptions underpinning past EV battery investments have changed, with downward revisions to assumptions on customer demand, utilisation, pricing, subsidies, and JV burden sharing.

The battery business has also not yet become a self-sustaining credit support from an earnings perspective. SK Innovation's FY2025 release shows that the battery business recorded revenue of KRW6.98 trillion and an operating loss of KRW931.9 billion in 2025. In 4Q 2025 alone, the battery business generated revenue of KRW1.46 trillion and an operating loss of KRW441.4 billion. The company cited a decline in sales following the expiry of US EV purchase subsidies, inventory adjustments by North American customers, year-end shutdowns at automobile plants, lower utilisation, and reduced AMPC benefits as factors. In 1Q 2026, SK Innovation's consolidated operating profit was strong at KRW2.16 trillion, but most of the improvement came from inventory valuation gains and crude-oil price lag effects in refining. SK On's battery business still recorded revenue of KRW1.79 trillion and an operating loss of KRW349.2 billion in the quarter. Although the loss narrowed by KRW91.6 billion quarter on quarter, operating profitability has not yet been confirmed.

At the same time, SK On is moving from being a pure battery-cell company toward a broader electrification platform that incorporates trading, resource procurement, lubricants, and cooling-related businesses. On 2025-02-01, the company announced the completion of a three-way merger with SK Trading International and SK Enterm, with SK On Trading International operated as a company-in-company. On 2025-07-30, SK Innovation announced a merger between SK On and SK Enmove, with the official launch scheduled for 2025-11-01. As of 2026-05-15, SK Innovation's publicly released 3Q 2025 earnings materials state "SK On-SK Enmove Merged Entity Official Launch on November 1st"; this report therefore treats the integration as completed. However, detailed post-merger pro forma financials and realised EBITDA have not been confirmed. The company's announced KRW800 billion EBITDA boost is therefore treated at this point as a potential improvement factor to be verified, not as a demonstrated result.

ESS / BESS is an important axis for SK On to reduce its dependence on EVs. On 2025-09-04, SK On announced a BESS supply framework with Flatiron Energy Development in the United States, securing a framework under which it can supply up to 7.2GWh of BESS through 2030. The initial project involves supplying containerised BESS units using 1GWh of LFP batteries for a project in Massachusetts, with deliveries scheduled to begin in 2H 2026. In 1Q 2026, SK On also disclosed that it had secured 284MW, or a 50.3% share of a total 565MW, in South Korea's second centralised ESS contract market auction. ESS could become a demand source distinct from EV customer inventory adjustments. However, pricing, LFP competition, project credit quality, warranty terms, fire safety, delivery schedules, grid connection, and policy requirements all matter, so credit improvement should not be anticipated too aggressively.

SK On should currently be viewed as being at a stage where it is building support through business restructuring while dealing with losses in the core battery-cell business and downward revisions to asset profitability. The narrowing of the loss in 1Q 2026 is positive, but credit improvement cannot be asserted without confirming operating profitability, earnings power excluding subsidies, FCF, short-term debt, asset disposals, parent support, and the guarantee structure of SKBA guaranteed bonds.

2. Industry Position and Franchise Strength

SK On's franchise is supported by its position in the non-Chinese EV battery supply chain, US local production, SK Group's industrial base, supply relationships with major automakers, and expansion into ESS / BESS. SK's company page describes SK On as serving EV, ESS, and Battery as a Service applications, and lists subsidiaries including SK On Hungary Kft., SK Battery America, Inc., SK Battery Manufacturing Kft., SK On Jiangsu, SK On Yancheng, and SK On Trading International. This indicates that SK On is not a single-plant, single-region operator, but a major battery platform operating across multiple regions and customers. Its production network in the United States, Europe, and Asia, as well as supply agreements with customers such as Nissan, show that customers regard the company as one of the key non-Chinese suppliers. Even amid the strong cost competitiveness of Chinese players, local production, IRA / AMPC benefits, tariffs, and supply-chain diversification may support its position.

However, the business base of the battery industry does not provide stable entry barriers comparable to a regulated utility. Chemistries, form factors, manufacturing yield, raw materials, subsidies, and customer platforms change quickly, and Chinese players have price competitiveness in LFP and ESS. If North American and European policy requirements change, the relative advantage of local production may also shift. SK On's franchise should therefore be read not as a long-term, fixed earnings defence, but as a competitive platform that remains effective as long as capital investment and execution capability continue.

The US production network is SK On's most important credit feature. SKBA's Commerce, Georgia site, BlueOval SK-related facilities, the Nissan supply agreement, and the redeployment of capacity to LFP batteries for BESS form the basis for capturing policy support and customer demand in the United States. In the September 2025 Flatiron BESS contract, SK On stated that it would use part of SKBA's EV battery production lines for LFP batteries for BESS. This shows flexibility to redeploy existing facilities toward ESS / BESS when EV demand is weak. Conversely, the same flexibility may also indicate that initial utilisation of dedicated EV investments has been lower than expected. Capacity conversion is positive, but the conversion itself entails risks relating to modification, certification, customer specifications, yield, and delivery schedules.

The customer base is both a credit support and a source of volatility. SK On has announced an approximately 100GWh supply agreement with Nissan, under which it plans to supply US-made high-nickel pouch cells for EVs produced in North America from 2028 to 2033. Relationships with existing US and European customers also support plant utilisation and market access. However, automakers' EV sales plans are affected by interest rates, subsidies, consumer demand, competing models, regulation, and politics. The fact that North American customer inventory adjustments and year-end automobile plant shutdowns pressured SK On's earnings in 4Q 2025 shows that short-term utilisation and profitability can move materially even when customer contracts exist.

The relationship with SK Group is also important. SK On is important to SK Innovation's and SK Group's future portfolio, and SK Innovation has shown a willingness to support the battery business through capital raising, business restructuring, disposal of non-core assets, buyout of FI interests, and integration with SK Enmove. This improves normal-course market confidence and the possibility of intragroup support. However, strategic importance within the group is not the same as an explicit debt guarantee. Securities with contractual guarantees, such as SKBA's KB-guaranteed notes, must be distinguished in credit analysis from expected support from the parent or the group.

Within the peer group, SK On is one of the major battery players in terms of business position, but compared with LG Energy Solution and Samsung SDI, it is unlisted, has thinner standalone disclosure, and there is a significant difference between the battery segment and legal-entity perimeter. It is weaker than LGES in credit transparency and visibility into standalone financials, while its distinguishing feature is support from SK Innovation's refining, E&S, and trading portfolio.

3. Segment Assessment

In assessing SK On's segments, it is first necessary to distinguish between the "SK On legal entity" and SK Innovation's "battery business". Since 2025, SK On has absorbed SK Trading International, SK Enterm, and SK Enmove, giving it a revenue and profit structure different from that of a pure battery manufacturer. The SK On (Battery Business) line shown in SK Innovation's earnings releases is centred on battery manufacturing earnings, while SK On Trading International is presented separately. Therefore, to assess SK On's overall credit, the loss-making battery business must be read separately from the more stable trading / lubricants / cooling-related businesses.

EV battery cells remain SK On's core business and the main arena for credit assessment. The battery business recorded an operating loss of KRW931.9 billion for FY2025 and an operating loss of KRW349.2 billion in 1Q 2026. The loss is narrowing, but profitability remains some distance away. Revenue growth alone is not sufficient. Fixed costs, quality warranties, yield, raw materials, AMPC / subsidies, inventory, and capex must be absorbed and converted into operating cash flow and FCF. The fact that the business still recorded a large operating loss in 4Q 2025 despite AMPC benefits of KRW101.3 billion shows that subsidies alone cannot fully offset weakness in underlying utilisation and mix.

The North American business is both the largest support and the largest source of volatility. US local production is highly relevant for IRA / AMPC benefits, supply-chain diversification, tariff and geopolitical risk, and non-Chinese sourcing needs. SKBA's Georgia site is also expected to be used for LFP batteries for BESS. At the same time, in North America, the BlueOval SK restructuring, customer inventory adjustments, the expiry of US EV purchase subsidies, year-end shutdowns, and AMPC volatility have all appeared in earnings. The approximately KRW4.2 trillion battery-related impairment simultaneously points to a potential reduction in liabilities and investment obligations, and to downward revisions to assumptions on customer plans, plant utilisation, and investment profitability.

ESS / BESS may help offset weakness in the battery-cell business. The September 2025 Flatiron agreement provides a concrete framework of up to 7.2GWh through 2030, an initial 1GWh, and deliveries starting in 2H 2026. In addition, in 1Q 2026, SK On secured 284MW in South Korea's ESS contract market. Unlike EVs, ESS has demand sources such as renewable integration, AI data centres, grid stabilisation, and capacity markets. If SK On uses LFP and safety technologies and applies SKBA lines to BESS, this could support both demand diversification and improved utilisation. However, BESS is awarded on a project-by-project basis and depends on customer financing, construction permits, grid connection, delivery schedules, fire safety, warranties, and long-term operating performance. How this translates into revenue, gross margin, warranty costs, working capital, and capex remains unconfirmed.

SK On Trading International, SK Enterm, and SK Enmove make the credit analysis more complex, but they may also provide support. Trading / storage functions could help manage battery raw-material procurement costs and price volatility risk. SK Enmove's base oil, lubricants, immersion cooling, and EV refrigerants may add relatively mature earnings sources to the loss-making battery-cell business. However, trading is affected by prices, hedging, inventory, and counterparties, and the benefits of the SK Enmove integration also need to be verified through pro forma financials and actual results. The conclusion of the segment assessment is that SK On's business restructuring is rational for credit preservation, but at the same time it also highlights the weakness of the standalone battery-cell business.

4. Financial Profile and Analysis

SK On's financial analysis requires separating three perimeters, because standalone financials are not sufficiently visible. First, SK Innovation consolidated includes the entire group, covering refining, petrochemicals, lubricants, E&P, SK Innovation E&S, the battery business, and materials. Second, the battery business shown in SK Innovation's earnings releases is close to SK On's battery manufacturing earnings, but does not match the entire post-restructuring SK On legal entity. Third, legal-entity figures for SKBA and SK On are important for confirming bond, subsidiary, and guarantee structures, but a continuous three-statement analysis is limited based solely on public information. With this limitation stated, the key figures required for credit assessment are as follows.

The first point from this table is that the direction of the group consolidated results differs materially from that of the battery business. SK Innovation reported a large consolidated operating profit of KRW2.16 trillion in 1Q 2026, but this was mainly driven by refining, inventory valuation gains, and crude-oil price lag effects. SK On's battery business recorded an operating loss of KRW349.2 billion in the same quarter. The group's overall profit cannot therefore be used to say that SK On's operating credit has improved. The support from the consolidated portfolio is important as a credit floor, but SK On's repayment capacity and market valuation depend on loss reduction and cash consumption in the battery business.

SK Innovation's FY2025 consolidated earnings were weak from a credit perspective, even though operating profit was positive. Against full-year revenue of KRW80.30 trillion and operating profit of KRW448.1 billion, the company recorded a pre-tax loss of KRW5.82 trillion. The major driver was battery business-related impairment. Even though this was a non-cash loss, it means that the capital-recovery outlook for past investments has deteriorated, and therefore remains a credit constraint for rating agencies and bond investors.

Cash flow is moving in a better direction, but is still not sufficient. According to SK Innovation's official IR cash flow statement, operating cash flow fell from KRW5.37 trillion in FY2023 to KRW2.23 trillion in FY2024 and remained at KRW2.28 trillion in FY2025. Investing cash flow was negative KRW11.24 trillion in FY2023, negative KRW7.30 trillion in FY2024, and negative KRW4.29 trillion in FY2025. The author-calculated sum of operating cash flow and investing cash flow was still negative KRW2.00 trillion in FY2025, meaning cash outflow after investment remains.

Figures for the SK On legal entity require particular caution. A DART-derived public summary shows FY2024 borrowings of KRW24.21 trillion as SK On major subsidiary data, but this report has not directly reconciled that figure with the original DART filing; it is therefore used only as supplementary evidence of leverage. In addition, the H1 2025 revenue figure of KRW28.56 trillion is not directly comparable with battery segment revenue because the integration of SK Trading International and other businesses significantly changed the revenue scale. It would be dangerous to look only at the H1 2025 operating loss margin and conclude that the battery business has improved sharply. Revenue growth due to perimeter changes must be separated from profitability improvement in battery cells.

The financial constraint is not only losses, but the quality of leverage. When S&P downgraded SK Innovation to BB+ in March 2024, it stated that the company's adjusted debt-to-EBITDA had risen to 5.7x in 2023 and was unlikely to fall below 4x by end-2024, given slowing EV battery demand and high capex. Moody's March 2025 public summary also linked SK Innovation's Ba1 CFR and negative outlook to weak operating performance in the battery division, heavy debt burden, and uncertainty over deleveraging. Rating-agency figures are adjusted and do not fully match company disclosures, but their common view is that the investment burden of SK On / the battery business is pulling down the group's overall credit metrics.

After asset impairments, apparent improvement and substantive improvement must be separated. The company's statement that Ford is expected to acquire the assets and liabilities of the BlueOval SK Kentucky plant could lighten SK On's asset and liability base. Non-core asset disposals and liquidations, the SK Enmove integration, and capital reinforcement could also contribute to debt reduction and capital strengthening in the short term. However, these are balance-sheet management measures, not improvements in the competitiveness of the battery-cell business itself. For credit improvement to be sustained, the remaining plants after asset rationalisation need to have sufficient utilisation and margins, and ESS, Nissan, and European demand need to convert into operating cash flow.

The financial conclusion is that the SK On / SK Innovation group has liquidity and support levers, but its credit ceiling is strongly constrained by battery business losses, impairments, post-investment cash outflow, leverage, and limited standalone disclosure. Loss reduction and funding restructuring have progressed from 2025 to 1Q 2026, but SK On still cannot be described as a battery credit that generates cash on a self-sustaining basis. The items to monitor are battery business operating profitability, profit excluding subsidies, operating cash flow, capex reduction, short-term debt, SK On standalone debt, and the post-SK Enmove pro forma profile.

5. Structural Considerations for Bondholders

For bondholders, the most common mistake with SK On is confusing the issuer name, ticker, and guarantor. Bonds seen under SKBTAM include SK Battery America-related notes, but SKBA's 2027 and 2029 guaranteed senior unsecured green notes are unconditionally and irrevocably guaranteed by Kookmin Bank. Therefore, as long as the guarantee is effective and there is no legal issue with guarantee performance, the payment risk of these notes depends strongly not only on SK On's losses or SK Innovation's Ba/BB ratings, but also on Kookmin Bank's credit quality and the guarantee agreement.

The offering circular for the 2027 SKBA notes states that US$500 million of 4.875% Guaranteed Senior Unsecured Green Notes due 2027 were issued by SK Battery America, Inc. and unconditionally and irrevocably guaranteed by Kookmin Bank. The notes and the guarantee are direct, general, and unconditional obligations, unsecured and unsubordinated, and pari passu with other unsecured and unsubordinated obligations. The 2029 SKBA notes are likewise US$1.0 billion of 4.250% Guaranteed Senior Unsecured Green Notes due 2029, with the same unconditional and irrevocable guarantee from Kookmin Bank.

Under this structure, analysis of the guaranteed notes has two layers. The first layer is whether the guarantee is legally enforceable, which obligations the guarantee covers, and what the conditions are regarding payment currency, taxes, sanctions, settlement, and governing law. The second layer is Kookmin Bank's credit quality. Moody's public summaries describe SKBA's KB-guaranteed 2027 and 2029 notes as Aa3, based on Kookmin Bank's Aa3 / stable rating, a3 BCA, and very high support assessment from the Korean government. S&P also assigned an A+ rating to Kookmin Bank's proposed senior unsecured notes on 2026-04-27, stating that this is in line with Kookmin Bank's long-term issuer credit rating of A+/Stable/A-1. Therefore, even if SK On's operating losses worsen, the KB-guaranteed SKBA notes have credit characteristics different from SK On standalone debt as long as the guarantee agreement remains effective and Kookmin Bank pays.

Debt guaranteed by SK Innovation would carry an entirely different risk profile. Moody's public summary states that SKBA's SK Innovation-guaranteed senior unsecured bonds due 2026 were downgraded from Baa3 to Ba1, while the Kookmin Bank-guaranteed 2027 bonds remained at Aa3. This shows that the identity of the guarantor materially changes credit risk. For SK Innovation-guaranteed debt, the battery business losses, SKI's adjusted leverage, deleveraging measures, earnings from refining / petrochemical / E&S, and the group's overall capital structure matter. For Kookmin Bank-guaranteed debt, Kookmin Bank and the guarantee agreement are central.

Public information on SK On operating debt is limited. A DART-derived public summary shows SK On major subsidiary borrowings of KRW24.21 trillion at FY2024-end, but detailed maturity, currency, collateral, guarantees, bank syndicates, covenants, and intercompany debt have not been confirmed. Creditors of SK On standalone debt take risk closer to the battery business cash flow and expected parent support. Parent and group support should be recognised, but absent confirmation of explicit guarantees or keepwell arrangements, SK Group-equivalent credit quality should not be assigned to all SK On obligations.

The structural conclusion is that distinguishing between SK On operating credit and SKBTAM / SKBA KB-guaranteed notes is the first condition for investment analysis. SK On is a loss-making, high-investment, restructuring battery credit whose operating credit has constraints close to speculative grade. By contrast, the KB-guaranteed SKBA notes should be analysed primarily as Kookmin Bank credit as long as the guarantee remains effective. Any buy, sell, or hold decision must first identify the relevant CUSIP / ISIN / maturity / guarantor.

6. Capital Structure, Liquidity and Funding

In assessing SK On's liquidity, it is necessary to distinguish between SK Innovation group consolidated liquidity, SK On / SKBA standalone debt, KB-guaranteed securities, bank support, and capital reinforcement measures. Public information does not provide a standalone SK On maturity schedule or unused committed facilities. This report therefore focuses mainly on SK Innovation consolidated cash, cash flow, and capital policy, while supplementing this with SK On-related funding structure.

SK Innovation's consolidated ending cash is large. The official IR cash flow statement shows cash and cash equivalents of KRW16.09 trillion at end-2025. Consolidated total liabilities were KRW69.22 trillion and total equity was KRW36.39 trillion, indicating a large capital base. Looked at in isolation, this suggests comfortable near-term liquidity. However, SK Innovation is a large group including refining, chemicals, E&S, battery, and trading. The location of cash, restrictions on movement between subsidiaries, JV constraints, overseas subsidiary funding, and bank borrowing terms are unknown. It is risky to assess SK On's standalone payment capacity solely from consolidated cash.

The most important liquidity support is that the group is executing concrete capital-policy measures. In its announcement on 2025-07-30, SK Innovation described total capital raising of KRW8 trillion, including a KRW2 trillion third-party allocation at SK Innovation, KRW700 billion of perpetual bonds, a KRW2 trillion third-party allocation at SK On, a KRW300 billion capital injection into SKIET, and an additional KRW3 trillion of capital reinforcement within the year. SK Innovation also stated that it would buy out SK On's FI-held convertible preferred shares for KRW3.588 trillion, and that it aimed to reduce debt by more than KRW1.5 trillion in 2025 through disposal and liquidation of non-core assets. These measures indicate that SK On / SK Innovation recognises its high investment burden and debt load and is moving to strengthen capital.

This capital policy is broadly positive for bondholders. Common equity, perpetual bonds, asset disposals, and dividend suspension help preserve debt-servicing capacity at least in the short term. SK Innovation's suspension of the FY2025 dividend can also be viewed positively as evidence that it is prioritising financial stability over shareholder returns. However, capital raising and PRS agreements involve capital costs, future share-price-linked burdens, and economic returns to outside investors. From a credit perspective, these measures should be read not as "the issue has been fully resolved because capital has been raised", but as "the company is mobilising capital markets, the parent, and financial institutions to manage its debt burden".

SK On's capex burden may already be easing. In March 2024, S&P expected SK Innovation's capex to significantly exceed operating cash flow, but since then SK Innovation has pursued non-core asset rationalisation, BlueOval SK restructuring, and the SK Enmove integration, and FY2025 investing cash flow narrowed to negative KRW4.29 trillion. However, it remains necessary to confirm whether capex can be reduced without damaging competitiveness, whether utilisation at existing plants will rise, and whether conversion to BESS will generate profit.

Green bonds and guaranteed bonds are strengths in funding access. SKBA issued US$500 million of 4.875% KB-guaranteed 2027 green notes in 2024 and US$1.0 billion of 4.250% KB-guaranteed 2029 green notes in 2026. A structure with a Kookmin Bank guarantee and Moody's expected Aa3 rating gives SK On / SKBA a means of raising foreign-currency funding at a higher rating band than its own standalone credit would support. This is useful for project funding and widening the investor base. At the same time, guarantee fees, guarantee capacity, bank relationships, eligible projects, green reporting, and guarantee maintenance conditions matter. The more guaranteed funding is used, the less it directly proves SK On's standalone unsecured market access.

The liquidity conclusion is that an imminent payment default is not the main scenario, but SK On's standalone liquidity cushion has not been sufficiently verified. The SK Innovation group has cash, capital reinforcement, asset disposals, dividend suspension, guaranteed funding, and a business portfolio. However, the battery business is loss-making, past-investment impairments are large, and SK On standalone borrowings and maturity structure remain unconfirmed. Bond investors should recognise consolidated cash, but assess SK On operating credit and SKBA / KB-guaranteed notes separately.

7. Rating Agency View

The rating agencies' views clearly show the credit constraints on the SK On / SK Innovation group. However, because a public standalone rating for SK On itself has not been sufficiently confirmed, this report separately reviews SK Innovation, SKBA-guaranteed notes, and Kookmin Bank-guaranteed notes.

On 2024-03-19, S&P downgraded SK Innovation and SK Geo Centric from BBB- to BB+, with a stable outlook. In its release, S&P stated that SK Innovation's debt leverage would remain elevated for longer than expected, and that slowing EV battery demand and high capex made it unlikely that adjusted debt-to-EBITDA would fall below 4x by end-2024. Adjusted debt-to-EBITDA was 5.7x in 2023, up from 3.3x in 2022. S&P expected the EV battery business to remain loss-making in 2024-2025 excluding AMPC, and was concerned about delayed improvement in battery margins and capex significantly exceeding operating cash flow. This view was broadly confirmed by the losses, impairments, and financial restructuring in 2025.

Moody's March 2025 public summary states that SK Innovation and SK Geo Centric were assigned Ba1 CFRs and that existing Baa3 issuer ratings were withdrawn. Moody's cited SK Innovation's financial leverage likely remaining elevated over the next one to two years, weak operating performance in the battery division, heavy debt burden, and uncertainty over the execution of sufficient debt-reduction measures. SKBA's SK Innovation-guaranteed senior unsecured bonds due 2026 were also reportedly downgraded to Ba1. In contrast, Kookmin Bank-guaranteed SKBA 2027 bonds were maintained at Aa3. This distinction is consistent with the structural analysis in this report.

For Kookmin Bank-guaranteed SKBA notes, the guarantee is the main driver of the rating. The 2027 notes offering circular states expected Aa3 by Moody's, and the 2029 notes offering circular also states expected Aa3. Moody's public summary states that SKBA's KB-guaranteed 2027 and 2029 notes are based on Kookmin Bank's Aa3 / stable rating. S&P also rated Kookmin Bank's proposed senior unsecured notes A+ in April 2026, stating that the rating was aligned with Kookmin Bank's issuer credit rating. Therefore, holders of KB-guaranteed SKBA notes need to assess not only SK On's performance, but also Kookmin Bank's capital, asset quality, deposit base, Korean government support, and bank regulation.

This report has not directly obtained Moody's latest full original reports. Therefore, Moody's figures and downgrade triggers are treated as supplementary information based on public summaries, and original reports should be reviewed before a final investment decision. For S&P, the March 2024 public page on SK Innovation and the April 2026 public page on Kookmin Bank were available, but whether there were any additional rating actions for SK Innovation as of 2026 requires further verification.

8. Credit Positioning

SK On's credit positioning must be separated into two layers. The first layer is the operating credit of SK On / the battery business, which should be compared with LG Energy Solution, Samsung SDI, global battery manufacturers, and high-beta Korean manufacturing credits. The second layer is the KB-guaranteed SKBA / SKBTAM notes, which should be compared not as SK On operating credit, but as Korean bank risk guaranteed by Kookmin Bank. Market spreads, bond prices, OAS, and CDS have not been confirmed in this report, so relative value is not asserted.

As an operating credit, SK On has weaker transparency and credit headroom than LG Energy Solution. LGES is listed and has relatively complete disclosures, including audited consolidated financials, quarterly releases, domestic and international ratings, cash, debt, capex, and FCF. Even so, LGES has constraints, including lower revenue in 2025, dependence on policy incentives, negative FCF, rising borrowings, and an operating loss in 1Q 2026. SK On is exposed to the same battery cycle, but is unlisted, has thinner standalone disclosure, is supported by SK Innovation's other businesses, and continues to report operating losses in the battery business. Its industrial position is major, but its issuer-credit transparency is weaker than LGES.

Compared with Samsung SDI, SK On has a stronger restructuring profile. Samsung SDI has issues around investment policy and customer composition, but is more likely to be viewed as having relatively conservative capital management and financial flexibility. SK On has strengths in US local production, the Nissan contract, BESS conversion, and SK Group support. However, its structure is complex, involving the BlueOval SK impairment, losses, SK Enmove integration, capital reinforcement, FI interest buyout, and KB-guaranteed bonds. For credit investors, SK On is best viewed as a restructuring credit with a strong industrial theme, but one that requires confirmation of recovery through actual results.

KB-guaranteed SKBA notes are a different instrument from operating credit. The 2027 and 2029 KB-guaranteed notes are based on Moody's expected Aa3 / Kookmin Bank guarantee, and the central credit risk is Kookmin Bank. It is not appropriate to compare these notes directly with LGES, Samsung SDI, or SK Innovation Ba/BB-band bonds. More relevant comparables are Kookmin Bank senior unsecured risk, Korean bank foreign-currency bonds, guaranteed use-of-proceeds bonds, and other bonds with the same guarantor. Of course, because the issuer name is SK Battery America, liquidity and headline risk may be affected by SK On. However, the primary source of credit loss is the guarantor.

This report does not verify live spreads, so it does not make buy, sell, hold, cheap, or rich judgments. Relative value assessment would require checking Kookmin Bank senior notes of the same maturity, guaranteed bonds from major Korean banks, LGES / LG Chem / Samsung SDI / SK Innovation bonds in the same tenor, SKBA bonds with different guarantees, green bond premiums, and liquidity. Based only on public information, the key point is that SK On operating credit is a restructuring credit requiring evidence of recovery, while KB-guaranteed SKBTAM is a high-grade bank-guaranteed product assessed around the guarantor.

9. Key Credit Strengths and Constraints

SK On's first credit support is its strategic position in the non-Chinese EV / ESS battery supply chain. The company has production networks in the United States, Europe, and Asia, and has announced an approximately 100GWh supply agreement with Nissan and a BESS supply framework with Flatiron. For automakers, battery cells are core components that are difficult to switch, and quality, mass-production capability, local production, subsidy eligibility, and long-term supply capacity matter. SK On's business base in this area supports market access and customer relationships even during periods of short-term losses.

The second support is involvement from SK Innovation / SK Group. Through the buyout of SK On's FI interests, capital reinforcement, SK Enmove integration, SK Trading International / SK Enterm integration, non-core asset disposals, and dividend suspension, SK Innovation is not leaving the battery business unattended and is advancing financial stabilisation. This supports normal-course banking relationships, guarantee capacity, capital-market access, and restructuring execution capability.

The third support is EBITDA reinforcement through business-portfolio restructuring. SK On has absorbed SK Trading International, SK Enterm, and SK Enmove, broadening its earnings sources beyond standalone battery manufacturing. Trading, tank terminals, base oil, lubricants, immersion cooling, and EV refrigerants may become more mature earnings sources than battery cells. However, the integration benefits need to be confirmed in actual results.

The central constraint is the battery business losses and weaker profitability of past investments. The FY2025 battery business recorded an operating loss of KRW931.9 billion, and 1Q 2026 still showed an operating loss of KRW349.2 billion. The approximately KRW4.2 trillion impairment including the BlueOval SK restructuring is not a cash outflow, but it shows that the economic value of plants and JVs in which capital was previously invested is lower than expected. When losses continue even including subsidies, recovery in underlying earnings power remains unconfirmed.

Another constraint is low financial transparency and structural complexity. SK On is unlisted, and figures for the battery segment, the SK On legal entity, SKBA, and SK Innovation consolidated are easy to mix together. The SK On legal entity has absorbed trading, tank terminal, and lubricants businesses, so improvement in revenue or EBITDA does not necessarily mean an improvement in the profitability of the battery business itself. Bond investors must constantly verify which legal entity's debt they are looking at, what guarantee is attached, and which cash flow can be accessed.

10. Downside Scenarios and Monitoring Triggers

The most realistic downside scenario for SK On is a prolonged slowdown in EV demand and customer inventory adjustment, preventing utilisation at North American and European plants from rising sufficiently. The sequence of deterioration would first appear in shipment volumes, average pricing, product mix, AMPC / subsidies, and plant utilisation. It would then feed through to earnings and operating cash flow through insufficient fixed-cost absorption, warranty costs, inventory, working capital, and operating losses. Thereafter, even capex cuts and asset disposals may fail to improve FCF, with knock-on effects for parent and bank support, ratings, refinancing terms, and additional impairment.

BlueOval SK restructuring is the largest event requiring further verification. The company states that the financial structure will improve because Ford will acquire the assets and liabilities of the Kentucky plant. However, public information does not sufficiently confirm which liabilities will transfer, which guarantees, contracts, employees, and supply obligations will remain, or which plants, customers, and assets could face additional impairment. If the restructuring entails higher-than-expected costs or residual obligations, the issue may not end with the non-cash impairment recorded in 2025, and could lead to cash outflows or additional losses.

A failed ESS / BESS ramp-up is also a realistic scenario. SK On presents the Flatiron BESS agreement and the Korean ESS auction as positive factors, but BESS is more price-competitive than EVs and is centred on LFP, where Chinese players are strong. Even if US local production provides a policy advantage, deliveries and monetisation could be delayed if customers cannot arrange project finance, grid connection or permits are delayed, or safety and warranty issues emerge. Redeploying SKBA lines may raise utilisation, but if conversion does not proceed as expected, additional costs and low utilisation could remain.

Improvement triggers include, first, battery business operating losses narrowing quarter by quarter, with earnings improvement confirmed not only including subsidies but also excluding subsidies. Second, capex reduction, asset disposals, FI interest processing, and the SK Enmove integration need to reduce net debt and short-term debt pressure at SK Innovation / SK On. Third, ESS / BESS contracts need to convert into deliveries, revenue, and profit, and actually offset slowing EV demand. Negative triggers include battery business losses remaining elevated from 2Q 2026 onward, capital reinforcement and asset disposals not progressing as planned, concentration of maturities in SK On standalone debt becoming evident, and additional rating downgrades by rating agencies.

11. Credit View and Monitoring Focus

At present, SK On's operating credit should be viewed as a recovering high-beta battery credit for which imminent payment default is not the main scenario due to strategic importance and group support, but for which investment-grade-type stability cannot be confirmed in standalone earnings power and leverage. Capital reinforcement from 2025, asset optimisation, the SK Enmove integration, and ESS expansion are improvement factors. However, until actual results are confirmed, the credit view remains neutral to slightly biased toward downside pressure because of battery business operating losses, BlueOval SK impairments, subsidy dependence, and customer-demand volatility.

This view is supported by SK On's status as a core electrification asset within SK Group, with production networks in the United States, Europe, and Asia, the Nissan contract, BESS expansion, SKBA, SK On Trading International, and the SK Enmove integration. SK Innovation has also shown a willingness to support the battery business through dividend suspension, capital reinforcement, FI interest buyout, non-core asset disposals, and the SK Enmove integration.

The constraints are clear. The battery business recorded an operating loss of KRW931.9 billion in 2025 and an operating loss of KRW349.2 billion in 1Q 2026. In 2025, SK On also recognised approximately KRW4.2 trillion of impairments including the BlueOval SK restructuring. This shows that the long-term growth theme of the battery business does not guarantee short-term earnings power or asset value. The group reported consolidated operating profit of KRW2.16 trillion in 1Q 2026, but this was heavily driven by refining inventory gains and lag effects, and does not directly improve SK On's operating credit.

From a bondholder's perspective, the credit obligor must be separated for each security. SKBA's KB-guaranteed 2027 and 2029 green notes primarily carry Kookmin Bank credit risk as long as the guarantee is effective, and are different from SK On's operating-loss risk. SK Innovation-guaranteed debt and SK On operating debt are directly affected by the group's Ba/BB-band credit, the battery business, deleveraging, and parent support. SK Innovation parent debt benefits from support from refining, E&S, and trading, but also incorporates SK On's investment burden.

The appropriate provisional investor stance is a two-track approach: cautious ongoing monitoring for SK On operating credit, and bond-specific analysis centred on Kookmin Bank guarantee risk for KB-guaranteed SKBA notes. The business base, group support, capital policy, and BESS diversification provide support, but operating profitability and debt-reduction results remain unconfirmed. Rating information in this report is based on publicly available materials and public summaries that were confirmable at the time of review; the latest original reports for SK Innovation / SKBA / Kookmin Bank and all rating actions as of 2026-05-15 remain items for the next review.

The credit view would improve if SK On demonstrates not only operating profitability including subsidies, but also improvement in profit excluding subsidies and operating cash flow; if group cash outflow shrinks after capex cuts; if the EBITDA contribution from the SK Enmove integration appears in actual results; and if S&P / Moody's outlooks stabilise. Conversely, if improvements remain only at the plan level, battery business losses continue, capital reinforcement and asset disposals are delayed, or additional impairments and changes in customer plans emerge, SK On's operating credit would be viewed more weakly. SK On is not a credit to buy simply for its industry position; it is a credit that should be assessed step by step as recovery evidence is verified.

12. Short Summary & Conclusion

SK On is an unlisted EV and ESS battery manufacturer under SK Group / SK Innovation. Its production networks in the United States, Europe, and Asia, Nissan contract, BESS expansion, and integration with SK On Trading International / SK Enmove make it an important part of the non-Chinese battery supply chain. SK On operating credit is supported by group support, business base, capital policy, and restructuring, but constrained by battery business operating losses, BlueOval SK impairments, subsidy dependence, capex, and limited standalone disclosure. SKBTAM / SKBA KB-guaranteed notes should be analysed separately from SK On operating credit and assessed around Kookmin Bank guarantee risk. For SK On operating credit, ongoing monitoring is required for loss reduction, profit excluding subsidies, FCF, capital reinforcement and asset disposals, and rating actions.

13. Sources

Primary Company Sources

• SK official company page, "SK on", accessed 2026-05-15. Used to confirm company profile, locations, subsidiaries, and EV / ESS / BaaS business scope. https://eng.sk.com/companies/sk-on
• SK, "SK On Signs Battery Supply Agreement with Nissan", 2025-03-19. Used to confirm the approximately 100GWh supply agreement with Nissan, planned supply from 2028 to 2033, and US production capacity. https://eng.sk.com/news/sk-on-signs-battery-supply-agreement-with-nissan
• SK Innovation / Ask Inno, "SK On Completes 3-way Merger, Driving Momentum for Sustainable Growth", 2025-02-01. Used to confirm the integration of SK On, SK Trading International, and SK Enterm; revenue and asset scale; EBITDA effect; and raw-material sourcing. https://askinno.com/global/archives/20097
• SK Innovation / Ask Inno, "SK Innovation Announces Merger of SK On and SK Enmove Amid Significant Capital Raising", 2025-07-30. Used to confirm the SK On / SK Enmove integration, capital raising, asset optimisation, net debt reduction policy, and 2030 targets. https://askinno.com/global/archives/21782
• SK Innovation, 2025 3Q Earnings Release, accessed 2026-05-15. Used to confirm the official launch of the SK On-SK Enmove merged entity on 2025-11-01. https://www.skinnovation.com/ir/earning/270?fileType=callFile
• SK Innovation / Ask Inno, "SK On Expands into U.S. BESS Market with LFP Batteries", 2025-09-04. Used to confirm the BESS supply framework with Flatiron Energy, up to 7.2GWh, initial 1GWh, use of the Georgia plant, and LFP BESS strategy. https://askinno.com/global/archives/21955
• SK Innovation / Ask Inno, "[SK Innovation's Q4 2025 Financial Results] Recording Revenue of KRW 19.67 trillion; Operating Profit of KRW 294.7 Billion", 2026-01-28. Used to confirm FY2025 consolidated revenue and operating profit, battery segment revenue and operating loss, impairments, BlueOval SK restructuring, dividend suspension, and 2026 outlook. https://askinno.com/global/archives/153922
• SK Innovation / Ask Inno, "[SK Innovation's Q1 2026 Financial Results] Recording revenue of KRW 24.21 trillion and operating profit of KRW 2.16 trillion", 2026-05-13. Used to confirm 1Q 2026 consolidated and segment revenue and operating profit/loss, SK On battery business losses, ESS auction, and Q2 outlook. https://askinno.com/global/archives/154570
• SK Innovation official IR financial highlights, balance sheet and cash flow statement, accessed 2026-05-15. Used to confirm consolidated total assets, total liabilities, total equity, operating CF, investing CF, and ending cash. https://devwww.skinnovation.com/ir/financial_statement and https://devwww.skinnovation.com/ir/cashflow_statement

Offering Circulars and Bond Structure

• SK Battery America, Inc., Final Offering Circular, US$500,000,000 4.875% Guaranteed Senior Unsecured Green Notes due 2027, dated 2024-01-16. Used to confirm the issuer, Kookmin Bank guarantee, ranking of the notes, ranking of the guarantee, expected Aa3, and green bond use of proceeds. https://links.sgx.com/FileOpen/SK%20Battery%20America%20-%20Final%20Offering%20Circular%20%28dd%2016.01.24%29.ashx?App=Prospectus&FileID=61175
• SK Battery America, Inc., Offering Circular, US$1,000,000,000 4.250% Guaranteed Senior Unsecured Green Notes due 2029, dated 2026-01. Used to confirm the issuer, Kookmin Bank guarantee, 2029 note terms, expected Aa3, and rating basis. https://links.sgx.com/FileOpen/SKBA-KB%202026%20Offering%20Circular_bannerless.ashx?App=Prospectus&FileID=68374

Rating Agency and Rating-Related Sources

• S&P Global Ratings, "SK Innovation And SK Geo Centric Downgraded To 'BB+' On High Investments Amid Slack Battery Demand; Outlook Stable", 2024-03-19. Used to confirm the SK Innovation downgrade, adjusted leverage, EV battery demand, capex, and rating triggers. https://www.spglobal.com/ratings/en/regulatory/article/-/view/type/HTML/id/3140328
• S&P Global Ratings, "Kookmin Bank's Proposed Senior Unsecured Notes Assigned 'A+' Rating", 2026-04-27. Used to confirm Kookmin Bank A+/Stable/A-1, equalisation of senior unsecured notes rating, and bank credit summary. https://www.spglobal.com/ratings/en/regulatory/article/-/view/type/HTML/id/3552027
• Moody's public summary via ResearchPool, "Moody's Ratings assigns Aa3 to SK Battery America's proposed notes guaranteed by Kookmin Bank", 2026-01-06. Used as supplementary confirmation of the Aa3 / Kookmin Bank guarantee structure for the SKBA 2029 notes. Full Moody's original report not obtained. https://app.researchpool.com/index.php/provider/moodys-investors-service/moodys-ratings-assigns-aa3-to-sk-battery-americas-proposed-notes-guara-pDALug2WVq
• Moody's rating action public summary via MK and TCR-AP archive, March 2025. Used as supplementary confirmation of SK Innovation Ba1 CFR, SKBA SKI-guaranteed bonds at Ba1, maintenance of Aa3 on SKBA Kookmin Bank-guaranteed 2027 bonds, and negative outlook rationale. Full Moody's original report not obtained.

Supplementary / Secondary Sources

• ChosunBiz English, "SK Innovation lifts profit but widens net loss as batteries drag in South Korea", 2026-01-28. Used as supplementary confirmation of FY2025 results and battery impairment. SK Innovation's release is prioritised as the primary source.
• ChosunBiz English, "SK Innovation returns to profit as oil surge fuels inventory gains", 2026-05-13. Used as supplementary confirmation of 1Q 2026 segment figures. SK Innovation's release is prioritised as the primary source.
• FinancialReports.eu / DART-derived SK Innovation Annual Report 2026 page, accessed 2026-05-15. Used as supplementary confirmation of SK Innovation's 2025 annual report filing location and DART-derived financial-statement extraction. The next update should directly recheck the original DART filing.
• issuer_summary/issuers/sk_on/data/sk_on_key_credit_metrics_20260515.json, created 2026-05-15. Used as working structured data for key metrics extracted from official sources and public summaries.
• issuer_summary/issuers/lg_energy_solution/current/lg_energy_solution_issuer_summary_20260513.md, accessed 2026-05-15. Used as a reference for comparison with Korean battery manufacturers and for framing AMPC, capex, FCF, and ESS / EV issues.
• issuer_summary/instruction/report_sample/nissan_issuer_summary_20260511.md, accessed 2026-05-15. Used as a reference for organising customer-side EV plans, restructuring situations, liquidity, and market access.

Unverified / Pending Items