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LG Energy Solution’s completed takeover of NEC ES ‘strengthens system integration capabilities’

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LGES said the takeover enables it to achieve a high level of vertical integration in the stationary ESS space. Image: NEC ES

LG Energy Solution, the battery technology arm of South Korea’s LG Group, has completed its acquisition of 100% ownership in battery energy storage system (BESS) integrator NEC ES.

The takeover will see NEC ES relaunched as LG Energy Solution Vertech Inc and will give its new parent company a broader set of offerings in the BESS space, LG Energy Solution (LGES) said today in a release sent to Energy-Storage.news

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The Massachusetts, US-headquartered energy storage subsidiary of Japan’s NEC Corporation was widely considered a leading player in the battery storage space when its sudden exit from the industry was announced in mid-2020

The company had packaged up battery cells and other components into complete BESS solutions, coordinated with NEC ES’ proprietary AEROS controls and software platform.

It had delivered just under a gigawatt (986MW) of BESS across 141 grid-scale and commercial & industrial (C&I) projects since NEC had itself acquired the business in 2014 from Chinese automotive tech company Wanxiang.

LGES noted in today’s release that NEC ES had achieved annual growth of 60% on average between 2018 and 2020 and posted US$207 million revenues in the latter year. It was however widely reported that it had not yet achieved profitability and it appears NEC Corporation was not prepared to give it any more time, although a deal had already been on the table from a prospective buyer at around the time the COVID-19 pandemic was declared by the WHO

NEC ES committed to carrying on with long-term O&M activities that had already been contracted for its projects, but no longer committed to or sought out new projects. 

Then in September 2021, LG ES said it would be acquiring NEC ES. The value of the transaction was not disclosed.

At that time investment banking advisor BDA Partners — which had advised LGES on the proposed transaction — said the deal would position LG Energy Solution as a kind of ESS sector one-stop-shop, giving it a high level of vertical integration within the space, from its upstream supply of battery cells to downstream system integration and other deployment services. 

An NEC ES commercial ESS project in Massachusetts, US. Image: NEC ES.

In today’s announcement LG Energy Solution highlighted the ongoing growth in global demand for standardised and fully-integrated energy storage systems that NEC ES’ experience and technologies could enable it to deliver. 

With battery cells the most critically important component of ESS systems and comprising a major portion of their costs, LGES said bringing together that end-to-end solution from cell to system will give it an advantage in the industry and benefits to customers in both capital equipment and site installation costs. 

It will be offering AC-coupled and DC-coupled energy storage systems as well as operations services from installation and remote monitoring to scheduled maintenance. 

The acquisition will enable LGES to leverage NEC ES’ operational data as well as its technologies. This will drive improvements in system-level performance and reliability, including the ability to monitor and acquire data from inverters and power conversion system (PCS) components. 

“Through the deal, LG Energy Solution will accelerate its energy storage business and ultimately better provide our clients with a more comprehensive ESS program that meets the growing demand,” LGES CEO Younsoo Kwon said.

“We are confident we can expand on the ESS business by escalating our competitiveness in terms of quality and ultimately become a leading global player within the industry.”

LGES floated a US$10+ billion IPO in late January, through which it said it aimed to expand manufacturing production capacity significantly in Europe, the Americas and Asia.

Its first financial results disclosure a couple of weeks ago included little mention of its ESS business and how the NEC ES acquisition would fit into its strategy, but sources close to the company have said it is enthusiastic about its prospects in the stationary storage sector. 

It will be interesting to see if direct vertical integration between cell production and system integration can ease some of the supply chain issues that are currently thought to be impacting on BESS technology providers and their ability to secure sufficient battery components and materials and keep reducing costs.  

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