There is renewed optimism for battery recycler Li-Cycle to restart construction on its expanded facilities in Greece.
And significant hurdles as well.
The Toronto-based company’s stock price rode that wave of hope and skepticism to close out last week. The rollercoaster continued with the start of trading Monday.
An end-of-day announcement last Thursday that Li-Cycle had closed on an upsized $475 million loan with the Department of Energy fueled a surge in the stock price. The loan amount was $100 million more than the initial DOE commitment, and included $30 million in capitalized interest.
“It's been a multi-year effort, for sure,” Li-Cycle CEO Ajay Kochhar said of the loan discussions that date to late 2021.
But those gains were erased Friday and the stock ended up losing value. The hitch: Li-Cycle must pay off outstanding debts and build up its reserves in order to receive the loan funds. In all, the company needs to raise $265 million in cash or credit by this time next year.
Li-Cycle abruptly halted construction on a multi-million-dollar facility last fall on the Eastman Business Park campus, citing a dramatic increase in project costs. The question since has been how and if the company will move forward and deliver on promises to create more than 200 jobs.
The facility will strip out the core metals from used lithium-ion batteries for reuse in new batteries, including for electric vehicles. Plans for the facility have been reconfigured and total costs are now estimated at $960 million.
Of those costs, $487 million remains outstanding. The figure includes $92 million in debts already incurred that Li-Cycle needs to resolve before it can draw on the loan.
“On the surface, it sounds great,” said Brighton Securities’ Ethan Wade. “They make it seem like they have secured a loan, and they can move forward with everything. But there are some significant caveats tied to them even getting their first payment on that loan, or the advance on it.”
Wade added: “And they still have to find additional methods of financing to be able to do it.”
Wade is among the skeptics, noting “this is a business that has been consistently bleeding cash every single quarter.”
Kochhar, though, argued current operations and the hub should be viewed separately, the latter being a growth project. Commitments from business partner Glencore have kept the project afloat. Closing on the loan was critical both for attracting additional investors — and given what happened in last Tuesday’s presidential election.
"It was important for us to get this done,” Kochhar said, “... so no matter what happens here, you know, post a new administration, I think we're in a good position from that perspective.”
There is likely to be a change in priorities between the Biden and Trump administrations when it comes to investing in climate technology companies. The Biden administration reportedly is moving quickly to cement federal support for renewable energy projects.
But Kochhar said the closing date had been known for some time. And the need for the project doesn’t change with who is in the White House, he said.
“The U.S. is still a disproportionate user and consumer of these materials, versus producer,” he said. “And so when you look at a tariff strategy, you look at, you know, an ‘America First’ strategy, domestic production of lithium, nickel, cobalt is still super important. I think it's something that cuts across both sides of the aisle.”
Kochhar said his sense is that investor interest in the climate tech sector is picking up. It's better than it was four or five months ago; more discerning than a few years back.
“I think the difference is, what's happening is it's just kind of like separation of the wheat from the chaff, to be pretty frank, I think a lot of companies back in 2020, ‘21 came out, and some had real products, and some maybe didn’t,” he said.
While investors were waiting to see the outcome of the election, he said he doesn’t think it changes their desire to invest in these sorts of sectors. But, Kochhar continued, “it may kind of tweak how they, you know, traverse along the road.”
