Page 20 - investor presentation

Our Investment

SK nexilis (f.k.a. KCFT) 2 EV Battery Materials

Deal Making (’17 ~ ’19) Value Up (’20 ~ on-going)

Identified early signals of supply shortage in copper foil, one of core parts to manufacturer high quality EV Expanded capacity adjacent to SK Battery plants
battery, through SK’s battery business supply chain experts • Used SKC-owned lands in Georgia (US) and Poland
• In 2017, SK Battery’s supply chain experts forecasted that demand for copper foil was expected to grow at a CAGR of 30% over to build adjacent plants to SK’s EV battery
the next 7 years based on EV battery order-books, but supply was highly constrained by key manufacturing equipment, titanium • Built manufacturing plant in Malaysia to use lower
drum made by only a handful of Japanese suppliers (250k shortage by 2025) power costs
Target
Sector Unit : ‘000 ’18 ’19E ’20E ’21E ’22E ’23E ’24E ’25E CAGR • Target to increase capacity to 250k by ’25 to
become a global No. 1 supplier
Copper Foil Supply (A) 120 190 270 330 400 470 520 580 25.2%
Copper Foil Demand (B) 120 200 290 390 470 580 690 830 31.8% Secured Japanese titanium drum supply (~70%)
Supply Shortage (=A-B) - (10) (20) (60) (70) (110) (170) (250) - • Long term contracts to secure 70% of total Japanese
drum supply by 2025, preventing other manufacturers
to expand capacity anytime soon

Leveraged SK Battery’s supply chain network and, among the 6 global top tier suppliers, identified 2 most Dispatched SKC’s film manufacturing
attractive targets based on technological capabilities, deal feasibility and SK’s value up potential KCFT experts to improve productivity
(Korea) & Wason (China)
• Leveraging SKC’s Roll-to-Roll film processing technology,
quite similar to copper foil manufacturing process
Capacity (‘18) Description
Deal • World’s No. 1 technological capabilities (with the world’s thinnest foil technology – 4um)
KCFT
Sourcing (Korea) 20k • Strong value up potential through capacity expansion based on superior technologies and higher portion Integrated copper procurement from
of high value-added products (24%) Wason’s to reduce raw material cost
• World’s No. 1 cost competitiveness
Wason 23k - Raw materials : Sourcing copper from its Parent company (Lingbao God) mining company at a lower cost Post-acquisition, Sales and
(China) - Lower operating cost : power cost by 25%, capex by 40%, labor cost by 60% (as compared to Korea)
• China’s high growth EV car market and local production advantages EBITDA increased sharply

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While contemplating to invest in just one or both to consolidate the 2 potential targets, identified proprietary Sales (U$m)
opportunity to invest in Wason (Aug. ‘18) EBITDA (U$m)
• Wason’s major stakeholder, D&R Group was restructuring and considered Pre-IPO of Wason, asking SK’s intent to invest U$20 81 82
million 71 603
Deal • Based on in-depth understanding of Wason already built-up through internal study, SK made a quick investment decision and
Review proposed much bigger checks to invest U$250 million for 26% stake in Apr. ‘19 (and increased its stake to 30% with additional 42
& investment in ‘20) 19 29
Execution Post acquisition of Wason, SK decided to acquire KCFT to consolidate the global top 2 suppliers for dominant 275 294 337
market position 201
• KKR, who owned 100% stake in KCFT, was asking unreasonably high valuation (U$2 bn vs. KKR’s investment cost of $300M), 144 160
and SK negotiated the price down to $1.1 billion (~50% discount from original offer) by catching KKR’s concern about exit
uncertainties around IPO
’15 ’16 ’17 ’18 ’19 ’20 ’21

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