SK On, a leading electric vehicle (EV) battery manufacturer, announced on June 23 (KST) its joint venture with American auto giant Ford Motor Company, BlueOval SK was offered a conditional commitment for a loan from the U.S. Department of Energy (DOE) of up to USD 9.2 billion.

The announcement is expected to strengthen the JV’s grounds for battery manufacturing in the U.S.

BlueOval SK is expected to sign the formal loan agreement as early as before the year-end. If the process is finalized, the funding will come from the DOE’s Advanced Technology Vehicle Manufacturing (ATVM) program authorized by the Energy Independence and Security Act of 2007. The program provides loans for projects related to fuel-efficient vehicles or eligible component manufacturing in the United States.

For the ATVM loan, the U.S. Treasury rate will be applied for the interest rate. This means once the DOE issues the final loan, BlueOval SK will be able to get the loan with a low interest rate equivalent to 10-year Treasury yield.

The DOE conducts rigorous due diligence, including and technical, market, financial, credit, legal, and regulatory reviews, to assess whether the project is eligible for the ATVM loan program.

While recognizing BlueOval SK’s battery production, which would be based on SK On’s battery solutions, the DOE said it expects the project to help building a domestic supply chain at a time U.S. ramping up electrification efforts in the auto market.

BlueOval SK, which was officially launched last July, will use the funds from the ATVM loan program for the construction of three battery plants – one in Tennessee and two in Kentucky. Once they become operational from 2025, the three plants are projected to have combined production capacity of more than 120 gigawatt hours (GWh), which is enough to power about 1.2 million* electric vehicles annually.

(*)If each electric vehicle is equipped with 105kWh battery on average

In July last year, SK On already received KRW 2.6 trillion of investment for its European battery business, including its third plant in Hungary, through export credit agencies (ECA), including German trade insurance agency Euler Hermes, Korea Trade Insurance Corporation, and Korea Export-Import Bank.

In addition, SK On has also secured KRW 2 trillion from SK Innovation, KRW 1.2 trillion from Korea Investment PE EastBridge Consortium, KRW 1.1 trillion from MBK Consortium and Saudi SNB Capital, KRW 0.51 trillion from Singapore financial investors, and KRW 1.2 trillion from Eurobonds.

Moreover, the company plans to secure investment resources through various methods such as operating cash flow following full-fledged business, sharing with partners through joint ventures, and incentives from investing countries.

“SK On’s sharp growth is expected to gain steam after securing the latest federal funding,” a SK On official said. “We will continue solidifying our leadership in the global electric vehicle battery market with utilization of various funding programs in the future.”

[Photo] SK On-Ford JV BlueOval SK’s plant in Glendale, Kentucky at BlueOval SK Battery Park