Koch extends battery bet, forms US lithium-ion cell production venture

Koch Strategic Platforms LLC, the investment arm of Koch Industries Inc., has formed a 50:50 joint venture with European battery upstart Freyr Battery to manufacture lithium-ion cells in the United States for electric vehicles and stationary energy storage systems, the companies announced Oct. 12.

The companies invested $70 million into Massachusetts-based battery developer 24M Technologies Inc. as part of their agreement to create 50 GWh of cell production at one or several sites to be selected in 2022. The venture partners also secured a limited exclusive license to use 24M's technology in the U.S., building on Freyr's license to produce cells at a series of planned factories in Europe, using 24M's recipe.

For Koch, an industrial powerhouse historically active in fossil fuel projects and led by billionaire CEO Charles Koch, the joint venture marks another significant energy transition play since launching the strategic investment affiliate almost one year ago.

"With that focus came the opportunity to invest in verticals that have tailwinds, one of which is energy transformation," Jeremy Bezdek, managing director of Koch Strategic Platforms, or KSP, and a board director at Freyr, said in an interview.

KSP was the lead investor in a $600 million transaction associated with Freyr's public listing on the New York Stock Exchange in July through a merger with a special purpose acquisition company. The Koch strategic investment team this year also committed more than $250 million to a variety of other battery and energy storage companies, including lithium-ion battery recycler Li-Cycle Holdings Corp., zinc-based energy storage developer Eos Energy Enterprises Inc. and lithium-ion battery startup Lithion Power Group Ltd.

"As you dig into the energy transformation industry and how energy is transforming ... the largest piece of that is in transportation, and the battery value chain created a significant amount of opportunities to deploy capital," Bezdek said.

'We need to build a lot of capacity'

For Freyr, the joint venture with Koch gives it a major industrial partner to help execute its strategy of producing cells in the U.S. with a largely domestic supply chain, replicating a blueprint the company is also following in Norway, according to Freyr CEO Tom Jensen.

"Ultimately, if the world is going to deliver on the energy transformation, we need to build a lot of capacity, and to build a lot of capacity you need cutting-edge project execution and operational excellence experience," Jensen said in an interview.

The companies are targeting initial production by 2025 and full build-out of 50 GWh by 2030. They may develop one big manufacturing plant or several, according to Jensen. Freyr's strategy is to rely on renewable energy to power its factories.

The plan is one of a growing number of existing and planned lithium-ion battery manufacturing developments in the U.S., led by automakers Tesla Inc., General Motors Co., Ford Motor Co. and their battery production partners, to meet soaring demand for electric vehicles and energy storage stations.

"At the end of the day, this is about building sustainable batteries fast at scale," Jensen said. "We believe in speed, we believe in scale and we believe in sustainability. This is what we are bringing to the effort."