LG Energy Solution (373220.KS) is actively utilizing low-interest policy funds to reduce raw material procurement costs.
According to industry sources on Friday, LG Energy Solution borrowed 300 billion won through the Supply Chain Stabilization Fund at the beginning of this year.
The loan interest rate is reportedly around 3% annually, which includes the fund bond rate plus a spread. The six-month fund bond rate is approximately 2.8% annually. Market observers estimate the company secured financing at a rate about 1 percentage point lower than what it would have obtained from commercial banks.
The loan has a six-month maturity. The funds are reportedly being used to cover raw material purchasing costs.
LG Energy Solution tapped the Supply Chain Stabilization Fund because of growing need to reduce financing costs amid prolonged weak earnings. The company posted an operating loss of 207.8 billion won in the first quarter of this year based on preliminary results. This follows a 122 billion won loss in the fourth quarter of last year when the company swung to deficit, with the losses now widening further. Industry observers attribute this to rising initial operating costs as the company expands its North American energy storage system (ESS) production base, compounded by ongoing tariff risks driving up cost burdens.
The Supply Chain Stabilization Fund is a policy fund established to support the procurement of raw materials and minerals needed for advanced strategic industries. It provides financing to private companies in the form of loans, guarantees, or equity investment. LG Energy Solution previously secured 270 billion won through the fund in 2024 when investing in Australian lithium company Liontown.
Industry sources say LG Energy Solution will actively utilize policy funds as it raises capital for large-scale investments. The company plans to expand ESS investment in North America. At last month's shareholders meeting, CEO Kim Dong-myung said, "We plan to increase the share of ESS and new businesses from the current level of about 20% to the mid-40% range going forward, building a stable and balanced business structure." LG Energy Solution aims to nearly double its global ESS battery production capacity to over 60GWh by the end of this year and strengthen ESS cooperation with major customers including Tesla.
