LG Energy Solution (373220.KS) has secured 300 billion won ($221 million) in low-interest financing through the government's Supply Chain Stabilization Fund. The battery maker turned to the policy fund as cost reduction became imperative amid prolonged weak electric vehicle demand that has resulted in two consecutive quarters of losses.
LG Energy Solution obtained the 300 billion won loan through the Supply Chain Stabilization Fund at the beginning of the year, according to industry sources Wednesday.
The interest rate is reported to be around 3 percent annually, comprising the fund bond rate plus a spread. The six-month fund bond rate currently stands at approximately 2.8 percent. Market observers estimate LG Energy Solution secured financing at roughly 1 percentage point lower than commercial bank loan rates.
The loan has a six-month maturity. The proceeds are reportedly being used to cover raw material procurement costs.
LG Energy Solution tapped the Supply Chain Stabilization Fund due to the pressing need to reduce financing costs amid prolonged weak performance. The company posted an operating loss of 207.8 billion won in the first quarter of this year based on preliminary results. This marks a widening of losses from the 122 billion won loss in the fourth quarter of last year, when the company first swung to a deficit.
Industry analysts attribute the cost pressures to rising initial operating expenses as LG Energy Solution expands its North American energy storage system (ESS) production base, compounded by ongoing tariff risks.
The Supply Chain Stabilization Fund is a policy fund established to support the procurement of raw materials and minerals essential for advanced strategic industries. It provides financing to private companies through loans, guarantees, and equity investments. LG Energy Solution previously secured 270 billion won through the fund in 2024 when it invested in Australian lithium company Liontown Resources.