SK On, South Korean 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.
This development is expected to bolster the joint venture's battery manufacturing operations in the United States.
The formal loan agreement between BlueOval SK and the DOE is likely to be signed before the end of this year. The funding for the loan will come from the DOE's Advanced Technology Vehicle Manufacturing (ATVM) program, which was authorized by the Energy Independence and Security Act of 2007.
The ATVM program offers loans for projects related to fuel-efficient vehicles or eligible component manufacturing within the United States.
Once the DOE issues the final loan, BlueOval SK will benefit from a low interest rate tied to the U.S. Treasury rate, specifically equivalent to the 10-year Treasury yield. To assess the eligibility of the project for the ATVM loan program, the DOE performs comprehensive due diligence, including technical, market, financial, credit, legal, and regulatory reviews.
The DOE acknowledges the significance of BlueOval SK's battery production, which will rely on SK On's battery solutions. The project is expected to contribute to the development of a domestic supply chain, particularly as the United States intensifies its efforts to electrify the automotive market.
BlueOval SK, established in July of the previous year, plans to utilize the funds from the ATVM loan program to construct three battery plants—one in Tennessee and two in Kentucky. These plants are projected to commence operations in 2025 and collectively have a production capacity exceeding 120 gigawatt hours (GWh). This capacity will be sufficient to power approximately 1.2 million electric vehicles annually.
Last year, SK On secured an investment of KRW 2.6 trillion for its European battery business, including the construction of a third plant in Hungary, through export credit agencies (ECA) such as Euler Hermes (Germany's trade insurance agency), Korea Trade Insurance Corporation, and Korea Export-Import Bank.
Additionally, SK On has received investments of 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 Singaporean financial investors, and KRW 1.2 trillion from Eurobonds.
Furthermore, the company intends to secure investment resources through various means, such as utilizing operating cash flow once its business is fully established, forming joint ventures with partners, and leveraging incentives from countries in which it invests.
“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.”
