Li-Cycle Holdings Secures $475 Million Loan from U.S. Department of Energy

By Ernest Scheyder

(Reuters) – The U.S. Department of Energy on Thursday finalized a $475 million loan for Li-Cycle Holdings, providing the metals recycler with crucial financial support to build a battery processing facility in New York. This project is integral to President Joe Biden's vision for a domestic electric vehicle supply chain.

The finalized loan marks a $100 million increase from a provisional announcement in early 2022 and aims to sustain the Glencore-backed firm as it focuses on expanding battery recycling, essential for powering electronics and electric vehicles in America.

This funding is also pivotal to Biden's climate agenda, ensuring governmental financial backing for Li-Cycle irrespective of potential changes in policy following the election of President-elect Donald Trump in January, despite investor concerns over Trump’s intentions towards renewable energy projects. Biden's administration is thus hastily moving forward to finalize loans and approve numerous projects before the transition.

Li-Cycle had been pursuing this loan for nearly three years but faced cost overruns and technical challenges, which included hiring a corporate restructuring expert, casting doubt on its viability. With rising inflation and stock prices plummeting over 75% in the past year, the company found itself unable to progress on its business plan while waiting for Washington's decision on its loan application.

The loan consists of $445 million in principal and $30 million in capitalized interest, enabling the Toronto-based company to seek additional private investment to fund the remaining $960 million for the project in Rochester.

Construction is expected to take 12 to 15 months after securing full funding. Jigar Shah, head of the Energy Department’s Loan Program Office, highlighted the loan as a key measure in supporting a robust domestic supply chain for electric vehicle batteries and critical materials, thus enhancing America's national and energy security.

In recent weeks, Biden officials have expedited several critical minerals projects, including a loan for Lithium Americas and permitting for a lithium mine in Nevada. Ajay Kochhar, CEO of Li-Cycle, expressed optimism about securing private financing and realizing the facility vision, echoing confidence in governmental support.

The loan will come with a 15-year term and interest rates tied to the 10-year U.S. Treasury rate at the time of funding issuance.

U.S. Senator Chuck Schumer, a New York Democrat, pushed for the funding, which could help bring the previously anticipated $485 million facility online after delays attributed to Energy Department mandates requiring union labor.

Li-Cycle has developed facilities across Arizona, Alabama, and Ontario, producing black mass from shredded battery parts. The forthcoming Rochester facility will be North America's first capable of transforming this black mass into lithium and other valuable metals.

The plant aims to generate 8,250 metric tons of lithium carbonate and 72,000 metric tons of mixed hydroxide precipitate (MHP) annually, a precursor for battery production. Glencore has committed to purchasing all MHP produced from the New York plant, a move that reinforced the Energy Department’s loan approval.

This facility is expected to create approximately 825 jobs during construction and 200 permanent roles upon opening. Li-Cycle plans to announce its second-quarter earnings on Thursday.

The Energy Department has also provisionally agreed to a $2 billion loan for Li-Cycle peer Redwood Materials, but that financing remains unfinalized.