T1 Energy Inc. Q3 FY2022 Earnings Call

Hello, everyone and thank you for joining the FREYR Battery Third Quarter 2022 Earnings Conference Call. My name is Daisy and I will be coordinating your call today. I would now like to hand the call over to your host, Jeff Spittel, Vice President of Investor Relations to begin. So Jeff, please go ahead.

Good morning, good afternoon and good evening. Welcome to FREYR Battery’s third quarter 2022 earnings conference call. With me today on the call are Tom-Einar Jensen, our Chief Executive Officer; Jan Arve Haugan, our Chief Operating Officer; and Oscar Brown, our Chief Financial Officer. During today’s call, management may make forward-looking statements about our business. These forward-looking statements involve significant risks and uncertainties that could cause actual results to differ materially from expectations. Most of these factors are outside FREYR’s control and are difficult to predict. Additional information about risk factors that could materially affect our business are available in FREYR’s F-1 and Annual Report on Form 10-K filed with the Securities and Exchange Commission, which are available on the Investor Relations section of our website. With that, I will turn the call over to Tom.

Thank you, Jeff, and good morning, good evening and good afternoon, everyone. Pleasure, as always, to be speaking to you on our sixth earnings call since we went public on the New York Stock Exchange for our third quarter earnings report for 2022. During today, we will go through some refreshers on what we’ve been doing to date. We’re going to refresh you on what we’ve done in terms of selecting technology. We’ll give you an update on where we are, talk about the market dynamics, which are accelerating in front of our eyes. I had the pleasure of announcing our Giga America ambition to the world a couple of days ago. I just returned from Atlanta. We’ll talk about that. We’ll talk about our strategic partnerships, and I will take you through updates on the operational side. Oscar will take you through updates on the financial side, and I’ll sum up with strategic priorities before we turn to Q&A. FREYR is a company that went public on the New York Stock Exchange on the eighth of July last year. We built our company around three core tenets of speed, scale and sustainability. Everything we do is linked to these three things. The last quarter has fundamentally supported that ambition as we have demonstrated moving forward at pace on the commercial side, the operational side and the strategic side. We offer differentiated exposure to the secular growth trends in the battery market, and we are an increasingly selected partner of choice in providing clean battery solutions. We are on track to becoming a global leader in this space. We have captured a large part of the nascent but rapidly growing energy storage systems (ESS) market, and we’re now seeing increased interest and momentum building in the commercial vehicle space as well as the electric vehicle space. We are a partnership-based organization, and we value our partnerships and develop ourselves in combination with and by learning from our partners that we have now from Japan in the East all the way to the U.S. in the West. As mentioned, we started out in 2018 when the idea was formed. As I mentioned to many of you before, we were inspired by Northvolt and impressed by their development. But as good Norwegians, we tend to think we can do it a little better than the Swedes. Fast forward to July 8 last year, when we went public on the New York Stock Exchange, clearly a formative point in FREYR’s history. Since then, a broad variety of important partnerships have been established, both for joint venture development in the U.S., for downstream opportunities with Nidec in module, pack and DC block, basically containerized ESS solutions, important supply chain partnerships with ITOCHU and Aleees on cathode manufacturing, and of course, the soon-to-be-completed Customer Qualification Plant, the sanctioning and development of Giga Arctic and our announcement of Giga America — all of which speak to our three core tenets in our strategy of speed, scale and sustainability, moving towards becoming a global champion targeting more than 200 gigawatt hours of capacity installed by 2030. Just want to take a moment to remind everyone about our technology strategy. FREYR took 18 months in our technology selection process before we landed on our first technology partner, 24M Technologies, an MIT spin-off out of Boston in the U.S. We were looking for three things when selecting technology. First, we wanted a technology that was commercially introduced because we wanted to get rapidly to the market with products in this exponentially growing demand for batteries in an increasingly supply-constrained environment. Second, we wanted something that offers a step change in performance and cost. Ultimately, this is a numbers game, and we need to be on the left-hand side of the cost curve to be able to compete with Asian business models in general and the Chinese business model in particular. 24M Technologies offers a dramatic reduction in the footprint of the facility, dramatic reduction in CapEx, strong reduction in energy consumption and much more production per employee and differentiates those who are able to take this to gigawatt-hour scale. Today, this is the first company to take this technology to gigawatt-hour scale, and we’re on track to push towards becoming that differentiated clean battery solution partner of choice. Equally important, our third criterion was to be able to improve this technology further over time. We’re very happy to have established very deep iterative discussions and partnerships with other licensees and the 24M family to ensure that we can continue to push the boundaries of what is possible within the existing raw material paradigm of core lithium-ion batteries while staying within a disruptive technology process, which we’re now advancing further as we speak. We are hard at work ensuring we can meet the industrial and financial milestones needed to get to gigawatt-hour scale. We are acutely aware of the integrated nature of building, financing and operating multiple facilities over time, and I am proud to announce we are making good progress on all our core verticals. We are intensifying and broadening our financing efforts to support the parallel development we’re now on with Giga Arctic and Giga America. The good news is we already have a detailed blueprint established for Giga Arctic, which will be relatively straightforward to replicate in detailed engineering and blueprint when we move into the detailed engineering phase for Giga America. This will allow us to apply our learnings from Giga Arctic to our next-generation development in Georgia, and we’re looking forward to leveraging our learnings from Norway and exporting them to our new partners in Georgia. The Giga Arctic project financing process is in its second stage, and Oscar will come back to that. We are targeting additional credit approvals in the first quarter of 2023. The Customer Qualification Plant is on track to produce its first cell in the next quarter in 2023, and that will enable us to unlock competitive project financing and accelerate further customer acceptance tests. There is increasing interest from strategic and industrial partners to enable what we label accelerated capital formation, and Oscar will take you deeper into that later. We have also tested 24M cells with one of the leading agencies in Europe linked to our customers, and we’re happy to see we are exhibiting top-quartile energy density and very strong safety performance. Seeing the performance of 24M cells relative to the energy storage market is generating a lot of traction with our customers, and we’re looking forward to documenting that we can produce these cells in the Customer Qualification Plant. We are continuing to accelerate commercially with more conditional offtake agreements in the process of being converted to firm offtake agreements. From a project finance point of view, we’re targeting 60% or more firm offtake capacity through 2032 to unlock bankable project financing solutions. Furthermore, we’re seeing an acceleration in interest for our solutions from the commercial mobility sector as well as the electric vehicle sector. We are in advanced discussions with a broad variety of stakeholders across the entire mobility and EV spectrum, and we will continue to mature long-term strategic partnerships with some of the leading firms on the planet. All of this requires a strong focus on securing relevant materials, and we are making good progress. We have secured most of the materials we need for the immediate future for both the Customer Qualification Plant and Giga Arctic. We have also announced efforts to establish localized and decarbonized suppliers for cathode materials into our Giga facilities, and our licensing partnership with Aleees, which I will return to in a second, is a good example. This will allow us to drive down costs, maintain our position on the left-hand side of the cost curve, and reduce the carbon footprint of the facilities we build. Let me take a moment to remind everyone of the exponential nature of growth in the ESS segment. We have always believed decarbonization is driven by both the transportation and energy sectors. Batteries in EVs eliminate the point of combustion at the tailpipe, but if you charge these batteries with nonrenewable energy and build them with nonrenewable energy, you will not achieve the required decarbonization. Therefore, we believe the market opportunity in energy storage is as large as in the electric vehicle segment. More stakeholders are revising their estimates upward. The only thing I know about these predictions is they are most likely wrong, but the other thing I know is that they continue to be revised upward. We believe the ESS opportunity is much larger than most people think, and this is one reason why we think the 24M production platform is particularly suitable for these applications. The platform supports very large and thick electrodes that can be applied into containerized solutions for storing sunlight and wind and provide stress relief to grids as they move to more intermittent power supplies. This movement fundamentally supports FREYR’s accelerated development, and our Giga Arctic and Giga America announcements should be seen in this context. We will also be producing batteries for commercial vehicles and electric vehicle applications, most likely from both facilities. The flexibility our technology platform provides is also a differentiating feature that we’re proud to take to gigawatt-hour scale. Late last week, we announced development of Giga America. We are committing to developing clean next-generation batteries in the U.S. at gigawatt-hour scale. It was a pleasure to take part with representatives from Coweta County and the State of Georgia in announcing our Giga America plans. Our initial phase development will be 34 gigawatt hours, roughly costing the same as Giga Arctic. We have received strong financial support from the county and the state of Georgia. Talent, logistics and infrastructure were key features in selecting this site. We did a very rigorous selection process looking at more than 130 sites across 25 states and landed in Coweta County, Georgia. We have 368 acres of prime industrial acreage, which we now aim to move into the development phase as we move into detailed engineering over the next weeks and months. This industrial acreage is ideal for multiple phases of battery cell manufacturing projects and could include upstream and downstream facilities. The site is 15 times larger than our site in Norway, giving us an opportunity to expand as commercial momentum grows in the U.S. Over time, we will invest more than $2.6 billion in this facility in line with the agreement with state and local municipalities, and employ over 700 people. We will leverage the 24M technology platform, which is a simplified process that helps us differentiate both for ESS and vehicle applications. It is important for us to be a geographically diversified provider of clean battery solutions. Customers value regional security of supply, and this is something you should expect customers to focus on as we convert offtake agreements to long-term sales agreements. In the quarter, we forged new strategic partnerships. One is with Aleees, the largest producer and developer of LFP technology outside Mainland China. We are evaluating how to establish our own cathode manufacturing facilities in Northern Europe and Scandinavia in particular. We’re also looking at how we can leverage the worldwide license we have for producing LFP precursor and cathode materials at our facilities in Norway and the United States. This secures core cost components and the core carbon content of the raw materials we use in production. A world-leading technology like Aleees, secured through a competitive licensing agreement, will enable us to stay on the left-hand side of both the cost curve and the carbon curve over time. Equally important, we have established a broader supply chain partnership with ITOCHU. ITOCHU is one of the leading trading houses in Japan and an investor and core supporter of the 24M technology, and they will serve as a direct material supplier for us in procurement and supply chain operations. We intend to leverage ITOCHU’s broad global network and expertise across the entire spectrum of securing and transporting world-leading materials for our battery cell ambitions. With that, I’m going to hand it over to Jan Arve to take you through the operational updates from the Customer Qualification Plant in Giga Arctic. Jan Arve?

Thanks a lot, Tom, and hello to everybody. As you can see on Slide 12, we are ready to give you the update from the Customer Qualification Plant (CQP). First, I am glad to inform you that we have yet another quarter without any reported serious safety incidents; a couple of minor incidents have been reported. The current workforce at the construction site in Norway is approximately 100 persons at the Customer Qualification Plant and close to 50 at the construction site for Giga Arctic. As work hours increase and more complex installations and work are elevated above ground, safe job analysis and multi-discipline coordination are important to maintain a safe and secure workplace. As we noted in previous earnings calls, we are progressing according to schedule, but of course we are not immune to challenges such as logistics, COVID-19 lockdowns and semiconductor scarcity. At the same time, this is what we plan for, and it’s how we solve these problems that shows how we secure delivery and identify workarounds to mitigate delays and cost consequences. I am glad to inform you the first important milestone was met last week when, at the site in Mo i Rana, we completed the site acceptance test for the milling machine, which is part of the upstream powder handling system delivered by Nippon Co. As you saw on the third page of today’s presentation, a team from South Korea from Hana Tech is performing installation and mechanical completion of the downstream section of the CQP. Most machines have completed factory acceptance tests at the manufacturers’ premises and are in transport to the plant in Mo i Rana. The casting and unit cell assembly delivered by MPAC Lambert is supply that is on the critical path for FREYR next year. We have mobilized an integrated team at the manufacturer’s site in the plant caster in the U.K., and the current program indicates transport to the plant in Mo i Rana will be done before year-end, and we will start installation to the dry room early next year. We plan to test the upstream units to make our own cathode and anode slurry well in advance of the casting deliveries. The operations team is an integrated part of the mechanical completion and commissioning group at the location in Mo i Rana. The key milestone for us is to start the casting of battery cells in the first quarter of 2023. The first test containers are currently being installed at the test center adjacent to the CQP. Turning to Giga Arctic, pre-approved funding for the construction program is now gradually emerging as concrete foundations are poured. Groundwork is according to schedule, and we have started erection of the prefabricated steel structure for the first dry room of Giga Arctic. Our building and infrastructure contractor is well advanced in preparing the site for steel fabrication. In parallel, production line equipment providers are collaborating in the design phase of the integrated production system; alignment of member information and interface coordination is the main focus in this collaboration phase until we can order long lead items. Finally, to indicate the size of this Giga factory, the facility is 120,000 square meters of floor space, which at Mo i Rana corresponds to approximately 77,000 square meters. To set this in comparison to what Tom talked about for Giga America, the scale is substantial. Our start-of-production (SOP) is planned for the summer of 2024, subject to closing the project financing. By this, I thank you and give the word over to Oscar for the financial update.

Great. Thank you, Jan Arve. Moving on to the financial update slide of the earnings deck. I will review our financial results for the quarter and the first nine months of 2022, and provide an update on our financing initiatives. For the quarter ended September 30, 2022, FREYR reported a net loss of $93.8 million, or $0.80 per share, compared with a net loss of $45.4 million for the same period last year, which was also the quarter we listed on the New York Stock Exchange. For the nine months ended September 30, 2022, the company reported a loss of $124 million, or $1.06 per share. It’s important to note that $70 million of the loss in the third quarter of 2022, and $46 million of the loss for the nine months ended September 30, related to a non-cash warrant liability fair value adjustment for those periods. As highlighted in our last earnings call, this liability moves period-to-period based on, among other things, the company’s stock price at the end of each period, generally reporting gains when the stock declined and losses when the stock rose, as was the case in the third quarter. Our stock price was just under $7 per share at June 30 and just over $14 per share at September 30, which resulted in a significant third quarter non-cash adjustment. More importantly today is our cash investment rate. We spent net cash of $70 million in the third quarter compared with $36 million in the second quarter, and $147 million for the first nine months of the year, ending the third quarter with $419 million of cash and equivalents, and no debt on the balance sheet. As shown on the financial update slide, cash was spent on corporate overhead, operating expenses and capital expenditures, primarily supporting the Customer Qualification Plant and Giga Arctic and a small amount of initial spending on our U.S. Giga factory and other business development activities. As mentioned last quarter, the mix of CapEx and OpEx will continue to skew more towards CapEx in the future, particularly as the Giga Arctic project matures. Also, with the Board approving incremental spending and commitments to continued progress in Giga Arctic, and as we move towards completion of the Customer Qualification Plant in Q1, we expect expenditures to increase further in the fourth quarter as they did in the third quarter. In addition, last week we completed the acquisition of the land for the Giga America site and took control of our U.S. joint venture with Koch, giving us full flexibility to bring on additional strategic partners to the Giga America project. With respect to financing, we completed the first phase of the Giga Arctic project financing journey during the third quarter. This was the market sounding process during which we went out to a group of commercial banks, multilateral development financial institutions (MDFIs), and export credit agencies with a proposed $1.5 billion targeted debt package. We’re up to 70% gearing when including capital expenditures for battery cell manufacturing, financing costs during construction, funding the debt service reserve account, working capital and pre-operating costs and other contingencies until the project achieves free cash flow. Results from the market sounding received in the third quarter were encouraging, with indications of interest up to $2.5 billion from more than a dozen lenders, plus the previously announced credit support from key export credit agencies. Final sizing of the project debt for Giga Arctic will be a function of the due diligence results, the balance of firm offtake agreements versus expected merchant sales, execution risk analysis and so on. We are now deep into the due diligence stage of the Giga Arctic project financing process with lenders currently utilizing five consultants to enhance their due diligence, as is typical for projects like this. This process will continue through November and into December as well as drafting and negotiations around a detailed term sheet that will be shared with an even broader lending group than in the market sounding phase. We are targeting conditional approvals from this group in the first quarter of 2023 and expect to address any remaining conditions precedent during the second quarter so we can close on project financing. While negotiations and evaluations are contained with our core lending group and our consultants and advisors, we expect typical conditions will revolve around the production of testable batteries from the CQP that are accepted by our customers, allowing enforcement of our long-term sales agreements as well as giving technical extrapolation of CQP performance to Giga Arctic’s planned operational model. There will be other conditions, of course, but we expect those to be key from a timing-to-close perspective. I should add we continue to field and evaluate capital formation opportunities and interest from a wide range of existing and potential commercial, strategic and industrial partners as well as financial institutions. This interest appears driven by the robust fundamentals behind long-term expected growth in battery demand for both the ESS and EV markets, and the progress FREYR has made since its NYSE listing 16 months ago. We seek partners who believe in FREYR’s mission and can grow with us as we evaluate projects like Giga Arctic, Giga America, potential upstream integration, our entrance into the mobility market and other opportunities. Certainly, our Giga America initiative and the passage of the U.S. Inflation Reduction Act have acted as a recent catalyst for such discussions, and we see the ramp of the Customer Qualification Plant early next year as another major commercial and financial catalyst. We are grateful for the ongoing support of our financial and industrial partners, including our shareholders, and our progress on all fronts as well as the continuous improvement in the demand outlook for our products and the urgency of addressing climate change being demonstrated by businesses and governments around the world. With that, I turn it back over to Tom for closing comments.

Thank you, Oscar, and thank you, Jan Arve. You both make my life a lot easier, of course. Thank you for your dedication to the company and your 24/7 focus on making us into the global champion we aspire to be. Let me summarize by repeating our key priorities. First, we are hard at work achieving the milestones required to complete our financing efforts, which revolves around producing sample cells in the Customer Qualification Plant in the coming quarter. This will unlock the Giga Arctic project financing and accelerate technology adoption with existing customers and additional customers in the commercial vehicle and EV space. We are seeing broad interest, as Oscar mentioned, in participating in the capital formation journey for FREYR, and we’re evaluating several options to grow in both Europe and North America to become a global champion for battery cell manufacturing. We are clearly focusing on converting conditional offtake agreements into long-term sales agreements, and we’re seeing deep interest across the board to accelerate that development linked to the CQP. We will be executing multiple projects in parallel; we have a team with experience planning, executing and operating multiple highly complicated multibillion-dollar projects in the energy and energy-intensive industrial space, and we are confident in our ability to develop, finance and operate multiple facilities in parallel. Right now our main focus is on the CQP and Giga Arctic. Giga America will follow in the field as we evaluate and develop opportunities on the upstream side and the downstream side with our partner Nidec in particular on module packs and containerized solutions for energy storage. We are a partnership-based organization, and we will continuously forge new partnerships along strategic, operational and financial axes to enable our initial Giga development ambitions in Norway and America. There are more opportunities emerging as we speak, but we will take one step at a time and move fast. In short, we’re validating, scaling our technology, financing it, executing it and delivering on our ambitions roughly in line with what we have communicated to the market so far. Thank you to all of our investors for staying with us on this journey. We look forward to updating you on a running basis as improvements and progress emerge. Thank you for your attention. With that, I turn it over to Jeff to take us through the Q&A. Jeff?

Thanks, Tom. We’re ready to open up the line for questions.

Our first question today is from Philipp Koenig from Goldman Sachs. Philipp, your line is open. Please go ahead.

Yes. Hey, guys. Thanks so much for taking my questions. My first question is a bit on progress on the financing. It seems the CQP is a very big piece to unlock both the project financing and potentially some other things. Is converting some of those offtakes into sales agreements also part of the agreements you have with some potential lenders in terms of unlocking financing? Is there any timeline you can give us on that — like end of Q1 or early Q2 as the timeline you’re targeting to start unlocking the financing for Giga Arctic? Beyond that project financing, you mentioned you’re also looking at other strategic options. There was an article in the press yesterday about a potential private equity investor providing you financing. Is that something you’re looking at? Could we expect some news before the end of the year? My last question is on the relationship with Koch in the U.S. Is it still a 50-50 partnership, or are you taking more control there? What does that mean for progress on Giga America? Thank you very much.

Thank you, Philipp. I’ll address some of these questions and then turn it over to Oscar for the financial aspects. First, we don’t comment on market rumors, but on the customer side: we fundamentally believe a strong supply-constrained environment will emerge, especially in ESS. ESS producers are being crowded by massive EV demand. This suggests when we’re up and running we can reserve a large part of capacity for merchant sales. At the same time, we need to document and demonstrate bankable cash flows for project finance. Therefore, we are considering a target around 60% long-term offtake for Giga Arctic and subsequently Giga America. We don’t see a material challenge in having sufficient demand to meet those objectives. Customers have specific requirements, as any customer would, for us demonstrating the products meet promised characteristics. The good news is our first legally binding contract with Nidec Corporation for 38 gigawatt hours, announced earlier this year, has options to upscale in volume through 2030 and extend tenor to better match project finance. Those volumes are based on initial activities with Nidec. One activity involves cell testing, and we’ve received first results of those cells. These sample cells provided from 24M in Boston show great uniformity between them, first-quartile energy density and stellar safety performance. All of this provides confidence that the technology itself is viable. Our core licensee of the 24M platform in Japan is already in commercial operation with the same technology, albeit with a different form factor and setup. We leverage these things to provide comfort to customers that we can produce the cells to the technical specifications required. At the end of the day, we need to provide sample cells from location, and that is what the Customer Qualification Plant will do. These are key ingredients to unlocking bankable project finance-based customer agreements. We are in the process of converting several existing agreements and have others in the making, so we’re confident in moving forward according to plan. Oscar, I’ll hand it to you to provide more depth on additional financing efforts and momentum.

Yes. Thanks, Tom. You summarized well. I would add the balance between long-term offtakes and merchant sales comes down to economics. Merchant sales generally produce better economics, while long-term contracts require less pricing aggressiveness to secure. There’s a balance between the two in the debt service coverage ratios we’re negotiating. That’s the dynamic we’re working through. Regarding Koch, we have taken control of the joint venture, owning more than 50% and we will consolidate it going forward. Koch has been a great partner in development and remains supportive for Giga Arctic, Giga America and site selection. The advantage now is we can bring in partners who align to having their own battery cell demand or other strategic and financial partners to finance this very large project over phases.

Thank you very much, guys, and best of luck going forward.

Our next question is from Maheep Mandloi from Credit Suisse. Maheep, your line is open. Please go ahead.

Hey. Good morning and thanks for taking the questions. On the U.S. plans, could you talk more in detail about what talks you are having with customers? In the past you talked about potentially having a pipeline with a large U.S. customer. Would that now be served with this factory or the Norway factory? Any other details on that customer would be appreciated.

Good morning. As we’ve announced previously, we have multiple customer arrangements; some are named and some are not, and some are clearly U.S.-centric. Generally speaking, in the ESS space in the U.S. there is momentum around rolling out gigawatt-hour-scale ESS projects nationwide. This offers opportunities for companies that want upstream exposure and downstream development. There are multiple opportunities with our existing customer group, both in terms of participating in Giga America per se and in forging upstream and downstream partnerships from cell production with companies that want security of supply and product development for end applications or inputs into cell production located close to large U.S. cell manufacturing facilities. We will come back to the market with specific updates when we formalize relationships. With our announcements and leading up to them, the intensity of conversations with existing and new partners has increased significantly. FREYR is becoming an asset we will leverage to strengthen industrial, strategic and financial development. We will update the market on a running basis when agreements are concluded.

Thank you. Our next question is from Nellie Estler from Clarksman Securities. Nellie, your line is open. Please go ahead.

Hi guys. Thank you for taking my question. I have two topics. First, on strategy: I have followed you for some time and understand you have been vocal about focusing mainly on ESS and potentially OEM deals. With the third quarter, I’ve noticed a push toward OEM relationships. Where do you see yourselves in, say, three to four years — for example, what proportion might be ESS versus EV? Second, regarding Giga America, you mentioned a $410 million financial incentive package. Could you share more detail on that?

Thanks. On strategy, we always said we want to target all markets but initially focus on ESS for reasons I've presented. That’s both a technology rationale and a fit for the 24M platform. However, the production platform is competitive across verticals and particularly suitable for ESS due to the ability to build large integrated electrodes. We can use the same form factor for select commercial vehicle applications — vehicles that don’t require fast charging but can charge overnight and have one or two cycles per day. We already have indications we can slot these cells into modules and packs fitting commercial vehicles. We are also in dialogue with many EV manufacturers and are maturing how we can play in that space. We believe stakeholders will increasingly want localized security of supply, and being active in two geographies increases FREYR’s optional value as a supplier. Moving forward, expect us to continue accelerating ESS penetration while gradually picking up pace in the electric vehicle space; commercial vehicles will be in between. We expect more demand than near-term capacity, so it will be a continuous optimization journey. We optimize product mix, use a flexible production platform and are flexible on what we produce where. Having secured prime industrial acreage in Giga America, along with our position in Norway and rights in Finland, gives us flexibility to provide differentiated product offerings. I’ll hand to Oscar for details on the incentive package.

Thanks, Tom. On the $410 million incentive package, it’s tied to spending and job creation. The combination includes some grants for items like land acquisition, but most benefits are tax abatements around sales tax and county-level property taxes and related incentives. The package is tied to the total spending for the multi-phase project over several years — the $2.6 billion total spend — and is realized over time as job creation and spending milestones are met. Those incentives relate to plant, equipment and phases of construction and operations over the project lifecycle.

Thank you. Our next question is from Gabe Daoud from Cowen. Gabe, your line is open. Please go ahead.

Thank you and hey everybody. Thanks for the prepared remarks. Tom, could you talk about supply chain issues impacting things? You mentioned some equipment needs to be delivered to CQP by year-end. Could you discuss what you are seeing around supply chain? Also on the labor front, is there anything to note given some reports in the U.S. about shortages of key talent?

Great question. There are three attributes we focus on: machinery, raw materials, and people. On machinery to the CQP: as Jan Arve mentioned, most equipment is scheduled to be delivered before Christmas. We will connect and commission systems after the new year. We have begun mixing cathode and anode slurries and will heat up formation and aging machinery as we move forward. The casting and unit cell assembly machine, the heart of the line, is scheduled for delivery before Christmas, so we don’t see material issues there. Electrochemistry is hard, but we have detailed plans, strong support from existing 24M licensees who have gone through the journey, and in-house expertise plus support from 24M. On raw materials: we have secured nearly all raw materials needed for the CQP up to 2028, and fully secured for the first couple of years. For Giga Arctic, we’re approximately two-thirds of the way there for materials through 2028. We are also evaluating establishing our own cathode manufacturing facility, which would further strengthen supply. We are working across the raw material spectrum with partners like ITOCHU and others to secure supply and decarbonize inputs, which we will announce as arrangements are formalized. On people: so far we have been able to recruit required personnel for the Customer Qualification Plant, and there’s strong interest for Giga Arctic and Giga America roles. The 24M platform is labor-optimized; it produces more batteries per employee than conventional facilities and requires a higher share of engineering-focused roles. While building these facilities is challenging, we’ve built an experienced project execution and operations team to tackle machinery, raw material and people challenges. So far, we are on good track.

Thanks, Tom. A follow-up on the technology: you mentioned 24M cells exhibiting top-quartile energy density. Can you provide more color on that? Also, you noted the technology is applicable to some automotive applications more so commercial than passenger. Regarding testing, is there anything you can say about the technology you’re targeting for that end market?

On testing, we will work with customers and provide more specific updates soon. We have seen top-end gravimetric energy density and stellar safety performance in recent tests. These are LFP cells with a decent form factor, and while we have just started the optimization journey on cathode and anode side for our LFP cells, the initial tests show first-quartile performance relative to conventional cells. This is encouraging and we will continuously optimize in the Customer Qualification Plant. Regarding applicability in EVs: the 24M technology is superior for lower C-rate applications — meaning slower charge and discharge cycles. Most batteries discharge relatively slowly over hours rather than a short fast discharge, but charging speed can be an issue for certain passenger EV applications. We see many vehicle applications, particularly commercial vehicles and EV segments that do not require fast charging, where our technology is well suited. We are also working to optimize for fast-charge applications, which involves electrolyte solutions and ionic conductivity improvements. We are seeing interesting results and will update the market as we validate them. Many OEMs find regionalized security of supply increasingly interesting, so momentum is strong. Thanks Gabe. Daisy, I believe we are ready for one more question, please.

Of course, our last question today comes from Tyler DiMatteo from BTIG. Please go ahead. Your line is open.

Tyler, can you hear us?

I believe Tyler has just disconnected. So, I will hand back over for any closing remarks.

Great. Well, thank you all for your interest in the company. We look forward to catching up with you over the next several days. Please feel free to reach out with additional questions. We will see you on the road this quarter. Thanks for your time.