The logo of LG Electronics is seen on the opening day of the Integrated Systems Europe exhibition in Barcelona on January 31, 2023.
Pau Barrena | Afp | Getty Images
South Korea-based LG Energy Solution announced Wednesday that it had signed a $4.3 billion contract for supplying batteries to a major corporation, without naming the customer.
The effective date of contract — receipt of orders — was Tuesday and it will conclude at the end of July, 2030. During this period, the counterparty will not be disclosed to maintain business confidentiality, the company’s filing with the Korea Exchange showed Wednesday. Reuters reported that Tesla was the counterparty.
Earlier this week, Tesla CEO Elon Musk confirmed that the EV maker was behind a previously undisclosed $16.5 billion chip contract with South Korea’s Samsung Electronics.
LG Energy Solution said in its filing that details of the agreement such as the deal amount were subject to change and the contract period could be extended by up to seven years.
The value of the disclosed contract eclipses the company’s 5.6 trillion Korean won ($4.05 billion) revenue for the second quarter of this year.
“Investors are advised to carefully consider the possibility of changes or termination of the contract when making investment decisions,” the company cautioned. It’s shares traded up 0.26% on Wednesday.
The filing did not clarify whether the lithium iron phosphate batteries would be used in vehicles or energy storage systems. Its major battery customers include American electric-vehicle makers Tesla and General Motors.
The company has been expanding its manufacturing in the U.S., with its first North American ESS battery manufacturing hub, located in Michigan, coming online in the second quarter of this year. The company is also constructing a plant in Arizona that will produce lithium iron phosphate batteries.
The deal is one of LG Energy Solution’s largest lithium iron phosphate contracts to date, and is expected to be tied to the Michigan plant which recently began production, Liz Lee, an associate director at Counterpoint Research told CNBC.
“While LGES has lagged Chinese players in EV [lithium iron phosphate], this major U.S. ESS order will help offset that and signals growing traction in the US energy storage market,” she said.
Assuming that Tesla is the counterparty, it would fit their previously stated goal of reducing reliance on China for ESS batteries, she added.
LG Energy Solution declined to comment on details of the deal. Tesla did not respond to CNBC’s request for comment.