Brisbane-based battery materials company Novonix (ASX:NVX) Ltd is aiming to reduce China’s grip on the global supply of graphite, with the help of a US Department of Energy (DOE) conditional loan of up to $US754.8 million ($1.2 billion)
The DOE’s direct loan will be issued to one of Novonix's wholly owned US subsidiaries and includes US$692 million in principal and US$62.8 million in capitalised interest.
The financing is intended to partially fund the construction of a proposed facility in Chattanooga, Tennessee, under the DOE LPO's Advanced Technology Vehicles Manufacturing (ATVM) Loan Program. The new facility will focus on manufacturing synthetic graphite, primarily for use in electric vehicle (EV) batteries.
Once fully operational, the plant is expected to produce approximately 31,500 tonnes per annum of synthetic graphite, sufficient to support the production of lithium-ion batteries for about 325,000 EVs annually.
The facility is projected to reach full production capacity by the end of 2028 and is expected to generate 450 permanent operational jobs and 500 construction jobs.
Novonix’s initiative aligns with efforts to reduce reliance on China's battery-grade graphite market, which currently accounts for more than 95% of global supply. This strategic move is a step towards strengthening domestic supply chains for critical materials.
“The reliance on China is a problem but we are now poised to combat it,” Novonix chief executive Dr Chris Burns said. “This conditional commitment from the government continues to underscore the focus on localising critical materials in the battery supply chain, such as graphite.
“This announcement is the culmination of years of hard work and is another critical milestone for our anode materials business towards our target production of 150,000 tonnes per annum in North America.
“Recent announcements from China to further scrutinise the export of battery-grade graphite to the United States highlight the importance of domestic production of high-performance, battery-grade synthetic graphite.
Our offtake agreements with strong partners have strengthened our leadership in onshoring the synthetic graphite supply chain in North America and supporting the path towards US energy independence.”
First large-scale production site
It has been a big year for Novonix, which has signed binding offtake agreements to supply synthetic graphite to Panasonic Energy, Stellantis and PowerCo.
To meet growing demand, the company has outlined plans to build a new production facility in the southeastern United States, designed to eventually scale up to 75,000 tonnes per annum of production capacity.
The proposed ATVM Loan Program funding would support the construction of the facility's first phase, targeting an initial capacity of 31,500 tonnes per annum. Novonix plans to expand production at the site to its annual target of 75,000 tonnes, contingent on customer demand and additional financing.
Its existing Riverside facility in Chattanooga, Tennessee, is on track to become North America’s first large-scale production site for high-performance synthetic graphite tailored for the battery industry.
Commercial production is expected to commence in 2025, with an initial annual capacity of 20,000 tonnes to fulfil current customer commitments.
To support the Riverside facility, Novonix has previously received a US$100 million grant from the Department of Energy’s Office of Manufacturing and Energy Supply Chains (MESC) and was selected for a US$103 million investment tax credit.
Loan details
Key terms of the DOE’s conditional commitment include:
The loan is for a maximum amount of US$754.8 million, which includes up to US$692 million in principal and up to US$62.8 million in capitalised interest and will be structured in two tranches based on a phased completion of infrastructure and production lines from a total eligible investment of US$943.6 million.
The loan will be comprised of two primary tranches that will have terms of 15 years and 10 years, respectively, from the date of first payment of each. The first tranche will be to support the site and infrastructure for the new facility and 21,000 tonnes per annum of production capacity, while the second tranche will support an additional 10,500 tonnes of production capacity annually.
An additional tranche to fund eligible project costs will be subject to repayment upon receipt of any proceeds derived from the monetisation of any tax credit received by the company or the borrower related to the new facility under the Qualifying Advanced Energy (NASDAQ:AEIS) Project Allocation Program.
The loan will be guaranteed by the company and secured by a first-priority security interest in all assets of the borrower, equity interests in and, with certain exceptions, assets of certain of Novonix’s existing subsidiaries.
Each advance of loan proceeds will have a separate interest rate set by the Federal Financing Bank under the general supervision of the Secretary of Treasury at the time that the respective advance is made.
While the conditional commitment reflects the DOE's intent to finance the new facility, several steps must be completed before finalising the loan. These include an environmental review by the DOE and the company’s fulfilment of technical, commercial, legal, environmental and financial conditions.
A binding loan agreement will also require the satisfactory completion of the DOE’s due diligence, adherence to conditions outlined in the term sheet, approval by the Novonix board, receipt of necessary governmental and third-party consents, and the successful negotiation and execution of binding loan documents.
Following the execution of binding loan agreements, Novonix and the borrower must meet additional conditions precedent before the loan can close and before the first and subsequent advances of loan proceeds are disbursed.