SK mulling acquiring stake in Monolith

SK Group is considering the acquisition of shares in Monolith, a U.S. company specializing in the manufacture of affordable, carbon-free hydrogen, according to industry sources, Wednesday.

The possible acquisition comes as Korea’s third-largest conglomerate pushes to become a global hydrogen energy giant, by creating a value chain of production, distribution and sales.

SK Group and its holding company, SK Inc., both said that nothing has been decided regarding the acquisition.

But sources knowledgeable about the matter said that SK Inc. will be in charge of the process, with the affiliate possibly purchasing the shares in the form of a strategic investment (SI), by spending “a few million dollars.”

Established in 2012, Monolith develops processing technology to convert natural gas into carbon-free hydrogen and carbon black, a key raw material in the automotive and industrial sectors.

Natural gas is primarily composed of methane that can be used to produce hydrogen. This production process results in the emission of carbon dioxide. But Monolith became the first U.S. firm to prevent such emissions through a plasma-based process.

Moreover, the firm relies 100 percent on renewable energy to manufacture hydrogen.

“And such green efforts are what brought SK’s attention to Monolith,” one source said. The green business represents one of the four key pillars of SK Inc.’s new endeavors, along with high-tech materials, biotechnology and digital technology.

Another source pointed out that the ability to manufacture carbon black in addition to hydrogen also makes Monolith an attractive investment.

“The mass production of carbon black can bring commercial benefits, considering the fact that it is used for carbon fiber and many other industrial materials,” the source explained. SK aims to have a total hydrogen production capacity of 280,000 tons by 2025.

Identifying hydrogen as a next-generation, eco-friendly energy, SK Inc.’s predecessor, SK Holdings, reviewed the feasibility of the hydrogen project and accordingly addressed strategies in early 2020.

In December 2020, the firm set up a group consisting of about 20 experts from related companies — such as SK Innovation and SK E&S — to pursue the hydrogen project.

In January, SK Group acquired a 9.9 percent stake in Plug Power Inc., a U.S. electric equipment firm that uses hydrogen in fuel vehicle fuel cells and other energy sources, becoming its largest shareholder. The two sides agreed to form a joint venture to set up an infrastructure for fuel cell systems in Korea by 2023, and to supply the products to domestic and Asian markets at low cost.

Plug Power is known for developing hydrogen fuel cell systems to replace conventional batteries.

This acquisition was seen as a plus for SK Group, whose affiliate SK E&S is Korea’s biggest importer of LNG, including CH4 — a major raw material for hydrogen production.

Also, hydrogen is generated as a byproduct at SK Incheon Petrochem, while SK Energy’s gas station networks could be used to offer green energy.