- Raising an enormous investment of 1.06 trillion KRW in the battery material business for its growth potential, a figure that is 7.1 times higher than its target of 150 billion KRW, made POSCO FUTURE M issue green bonds worth double their originally intended amount.
- POSCO FUTURE M's K-taxonomy-applied green bonds are the first of their kind in the battery industry, with the company slated to receive 300 million KRW each year from South Korea’s Ministry of Environment as support for interest expenses.
- All proceeds from the issuance of the bonds will be used as facility funds for the company's cathode production plants in Pohang.
According to the company’s website news release on April 25, 2023, POSCO FUTURE M will issue “Korean green bonds,” the first of their kind in the battery industry. POSCO FUTURE M has decided to issue 300 billion KRW worth of bonds, twice as much as the initially planned amount of 150 billion KRW, as a result of its good performance in a demand forecast.
Unlike ESG bonds, Korean green bonds are corporate bonds that are subject to the Korean green classification system or “K-taxonomy”*, which has been enforced this year. For bonds to qualify as Korean green bonds, they must contribute to at least one of the following: reduction of greenhouse gases, adaptation to climate change, sustainable conservation of water, transition to a circular economy, pollution prevention and control, and the conservation of biodiversity. They must also cause no harm to other environmental objectives. To promote the issuance of Korean green bonds, South Korea’s Ministry of Environment has decided to support interest expenses by providing issuing companies with up to 300 million KRW per year.
* The Korean green classification system (K-Taxonomy): Korean green classification guidelines that set standards for green economic activities to achieve a sustainable circular economy, promoting green finance, and preventing “greenwashing,” bogus green activities.
With a plan to use all proceeds from bond issuance as facility funds for its NCMA and NCA cathode production plants in Pohang, POSCO FUTURE M has received green bonds issuance qualification thanks to the business in question having been classified as an economic activity for manufacturing materials, parts, and equipment associated with innovative items in the greenhouse gas reduction sector, which is among the South Korean government’s six environmental objectives. As a result, the company is now eligible to receive monetary support of 300 million KRW this year for interest expenses from South Korea’s Ministry of Environment.
POSCO FUTURE increased the size of its bond issuance when funds of 1.06 trillion KRW, 7.1 times its target amount, had been raised thanks to being rated as highly credible with a credit rating of AA- and also having high growth potential in a demand forecast for its battery business conducted on the 19th.
The bonds to be issued amount to 300 billion KRW, consisting of a three-year bond worth 200 billion KRW and a five-year bond worth 100 billion KRW, and each of them will be issued at an interest rate lower than the *individual privately rated interest rate. The 3-year bond will be issued at an interest rate that is -0.09%p lower than its privately rated interest rate, while the interest rate for the 5-year bond will be -0.21%p lower than its privately rated interest rate. The interest rates for the bonds will finally be determined based on the privately rated interest rates as of April 26.
* Privately rated bond-specific interest rate: An average of rates calculated by private bond rating companies.
The fact that POSCO FUTURE M has drawn a considerable amount of investment in spite of reduced liquidity in the capital market, resulting from factors including global rises in interest rates, can be construed as reflecting the high interest in green bonds and the expectations of the capital market that POSCO FUTURE M will continue to grow through its technological prowess and differentiated competitive strengths, such as having secured a full value chain from raw materials to material production within POSCO Group.
Of POSCO FUTURE M, NICE Investors Service Co., Ltd. said, “Through this preliminary review of its issuance of Korean green bonds, POSCO FUTURE M has proven that it is equipped with an environmental management promotion organization and establishes environmental action strategies under the environmental management vision of “becoming a low-carbon green company who leads the global market.” In terms of long-term risk management, the company also establishes countermeasures when reviewing investment projects by using an ESG checklist that considers factors such as climate change and biodiversity. In addition, POSCO FUTURE M is also spreading its corporate citizenship management philosophy and practicing ESG management in a systematic manner primarily through its corporate citizenship bureau.”
POSCO FUTURE M vice president Yoon Deok-il, who is also head of the company's planning & support headquarters, said, “Following our issuance of ESG bonds in February, this time, we, POSCO FUTURE M, have been approved to issue Korean green bonds, which proves to us once again our growth potential and our investors’ expectations for and validation of our eco-friendly businesses. We will continue to practice our management philosophy and transformation into an eco-friendly future materials company.”
