8-K: Li-Cycle Secures $475 Million DOE Loan for Rochester Hub, Marking First for Battery Recycling

Li-Cycle has finalized a $475 million loan facility with the U.S. Department of Energy to support the development of its Rochester Hub project, a first for a battery recycling company.

Summary

• Li-Cycle has secured a $475 million loan facility from the U.S. Department of Energy's ATVM program, an increase of $100 million from the original conditional commitment.
• The loan includes up to $445 million in principal and up to $30 million in capitalized interest during the construction period.
• The interest rate will be fixed at the applicable long-dated U.S. Treasury rate with a 0% spread.
• The loan has a 15-year term with a final maturity date of March 15, 2040.
• Principal repayments are deferred until June 15, 2027, and interest during construction can be capitalized up to $30 million.
• The first advance is contingent upon satisfying certain conditions, including settling existing project commitments of approximately $92 million and funding approximately $173 million in reserve accounts, of which up to $97 million can be satisfied through letters of credit.
• The total capital cost for the Rochester Hub project through to mechanical completion is estimated at approximately $960 million, with a remaining cost to complete of approximately $487 million.
• The Rochester Hub is expected to produce up to approximately 8,250 tonnes of lithium carbonate and up to approximately 72,000 tonnes of MHP per year, with a planned nameplate processing capacity of 35,000 tonnes of black mass per year.
• The project is expected to create approximately 825 construction jobs and more than 200 permanent jobs.

Sentiment

Score: 8

Explanation: The document is positive, highlighting a significant financial achievement and the strategic importance of the project. The language is optimistic and forward-looking, indicating confidence in the company's future.

Positives

• The DOE Loan Facility represents a strong vote of confidence in Li-Cycles technology and business model.
• The loan facility offers attractive terms relative to other third-party financing alternatives.
• The loan facility will enhance Li-Cycles financial flexibility.
• The loan facility will support Li-Cycles mission to create a sustainable, closed-loop battery supply chain.
• The Rochester Hub is expected to be a significant domestic source of recycled critical materials for producing lithium-ion batteries.

Negatives

• The first advance under the DOE Loan Facility is subject to satisfaction or waiver of certain conditions and requirements, including completing the Companys base equity contribution to the Rochester Hub project.
• The total capital cost for the Rochester Hub project through to mechanical completion is estimated at approximately $960 million, with a remaining cost to complete of approximately $487 million, which excludes costs for project commissioning, ramp-up, working capital or financing.

Risks

• The Company is actively exploring financing and strategic alternatives for a complete funding package needed to restart the construction of the Rochester Hub.
• The estimated amounts for the base equity contribution and reserve accounts may change prior to the first advance.
• The Company may not be able to satisfy the conditions for the first advance under the DOE Loan Facility.
• The Company may not be able to obtain additional financing on acceptable terms or at all.

Future Outlook

The Company is actively exploring financing and strategic alternatives for a complete funding package needed to restart the construction of the Rochester Hub and for general corporate purposes. The funding package would assist in satisfying the funding conditions for First Advance under the DOE Loan Facility, including funding the remaining BEC and a minimum cash balance.

Management Comments

• Ajay Kochhar, Li-Cycle President and CEO, commented: Throughout 2024, one of Li-Cycles primary objectives has been to finalize negotiations with the DOE in order to enter into definitive documentation to obtain a DOE loan.
• Ajay Kochhar, Li-Cycle President and CEO, commented: Today, we are excited to announce our achievement of this significant milestone, which we believe represents a strong vote of confidence in Li-Cycles patented and environmentally friendly recycling technology and business model.
• Ajay Kochhar, Li-Cycle President and CEO, commented: Securing the DOE Loan Facility through our close collaboration with the DOE is a critical step toward our goal of restarting construction at the Rochester Hub project.
• Ajay Kochhar, Li-Cycle President and CEO, commented: We believe that the DOE Loan Facility offers attractive terms relative to other third-party financing alternatives available to us. We believe it will also enhance our financial flexibility and support our mission to create a sustainable, closed-loop battery supply chain, which is vital to the electrification transition and securing energy independence in North America.

Industry Context

This agreement marks the first DOE loan facility to be finalized for a battery resource recovery facility and sustainable lithium-ion battery materials recycling company, highlighting the growing importance of battery recycling in the U.S. and Li-Cycles position as a leading supplier of recycled critical materials for lithium-ion batteries.

Comparison to Industry Standards

• The $475 million loan facility is a significant investment in the battery recycling sector, which is crucial for the development of a sustainable and domestic supply chain for lithium-ion batteries.
• The loan facility is the first of its kind for a battery recycling company, setting a precedent for future government support in this sector.
• The Rochester Hub project is expected to be a major player in the North American market for recycled battery materials, with a planned nameplate processing capacity of 35,000 tonnes of black mass per year.
• The expected production of up to approximately 8,250 tonnes of lithium carbonate and up to approximately 72,000 tonnes of MHP per year at the Rochester Hub positions Li-Cycle as a major supplier of these critical materials.
• The project is expected to create approximately 825 construction jobs and more than 200 permanent jobs, which is a significant contribution to the local economy.

Stakeholder Impact

• Shareholders: The loan facility is expected to enhance financial flexibility and support the company's mission, which could positively impact shareholder value.
• Employees: The Rochester Hub project is expected to create approximately 825 construction jobs and more than 200 permanent jobs.
• Customers: The Rochester Hub is expected to be a significant domestic source of recycled critical materials for producing lithium-ion batteries, which could benefit customers in the battery supply chain.
• Suppliers: The project will require a steady supply of black mass, which could benefit suppliers in the battery recycling industry.
• Creditors: The loan facility provides a significant source of funding for the project, which could improve the company's creditworthiness.

Next Steps

• Li-Cycle will work to satisfy the conditions for the first advance under the DOE Loan Facility.
• Li-Cycle will continue to explore financing and strategic alternatives for a complete funding package for the Rochester Hub project.
• Li-Cycle will restart construction at the Rochester Hub project.

Key Dates

Keywords

lithium-ion battery recycling, battery materials, resource recovery, U.S. Department of Energy, DOE Loan Facility, Rochester Hub, lithium carbonate, mixed hydroxide precipitate, MHP, ATVM program