South Korean battery maker LG Energy Solution on September 18 priced its inaugural green bond amounting to US$1 billion, which generated a strong investor demand.
The Reg S/144A offering comprised of two tranches, with the first tranche amounting to US$400 million for three years. It was priced at 99.693% with an interest rate of 5.625%, representing a spread of 100bp over the US treasuries or 40bp tighter than the initial price guidance of 140bp area. The second tranche amounting to US$600 million for five years was priced at 99.914% with an interest rate of 5.75% or equivalent to a spread of 130bp over the US treasuries, which was also 40bp inside of the initial price range of 170bp area.
The deal garnered a combined order book of US$5 billion with the three-year bond attracting demand in excess of US$1.8 billion from 114 accounts. More than half of the offering or 55% was distributed in Asia-Pacific, 25% in the United States, and 20% in EMEA. By type of investors, asset and fund managers accounted for 63% of the paper; central banks, official institutions and insurance companies 20%; banks 14%; and private banks, securities companies and brokers 3%.
The five-year bond attracted total orders of over US$3.2 billion from 186 accounts with 64% allocated in Asia-Pacific, 25% in EMEA and 21% in the US. Asset and fund managers were also the biggest buyers of this tranche with 67%, followed by central banks, official institutions and insurance companies with 22%, banks 9% and private banks, securities companies and brokers 2%.
Proceeds from the transaction will be used to finance or refinance new or existing projects relating to low carbon transportation and energy efficiency in accordance with LG Energy’s green financing framework dated February 2023.
BofA Securities, Citi, Morgan Stanley, Standard Chartered, and Korea Development Bank were the joint bookrunners for the transaction.
LG Energy announced in September this year its plans to triple global sales of its energy storage system (ESS) division in five years, driven by the expansion of the US market. The company has secured a large-scale ESS battery production base in Queen Creek, Arizona, commencing production in the first quarter of 2026 with a production capacity of 16 gigawatt hours.
LG Energy went public in January 2022, raising 12.8 trillion won (US$9.64 billion) in the largest South Korean initial public offering ever.