(Bloomberg) — Li-Cycle Holdings Corp., which is set to receive significant backing from the Biden administration, saw its share price slashed nearly in half after announcing it would pause construction on a first-of-its-kind lithium-ion-battery recycling plant.
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The Toronto-based company has decided to temporarily halt work on its Rochester Hub while it undergoes a strategic review, which includes an assessment of scope and budget. Li-Cycle cited escalating construction costs that exceed its initial projections and is working closely with the US Energy Department regarding a $375 million loan commitment.
Li-Cycle is one of many companies competing to meet the growing demand for battery materials in the shift away from gas-powered vehicles. The US government is providing substantial financial support in subsidies and tax incentives to establish a domestic supply chain to rival China’s dominant industry position. This setback highlights the challenges faced by the US and the West in jump-starting a new industry.
Li-Cycle’s shares plummeted up to 49% in New York and closed at $1.23, marking a record-breaking 46% drop for the day.
“The board of directors has decided to pause construction work on the Rochester Hub, pending a review of the project, including an evaluation of the go-forward phasing of its scope and budget, including construction strategy,” according to the statement. “As previously disclosed, engineering and procurement for the project are largely complete, with the current focus being on construction activities on site.”
Following the Biden administration’s announcement that the company’s US subsidiary would receive a loan to support the expansion of its facility, shares of Li-Cycle rose by 6% in February. The loan, provided by the Department of Energy’s Advanced Technology Vehicles Manufacturing Loan Program, aims to finance the recycling of lithium-ion batteries into chemicals for more than 200,000 electric vehicle batteries each year. This funding aligns with the White House’s goal of making half of all car sales zero-emissions by 2030.
This unexpected announcement comes amid Republican scrutiny of the Energy Department’s increased loan authority under President Biden’s climate law. Congressional Republicans are eager to avoid another Solyndra LLC situation. Solyndra, a California-based solar manufacturer, collapsed soon after receiving a $535 million loan guarantee during the Obama administration, leading to a temporary pause in loan activity due to extensive congressional investigation.
The Energy Department clarified that the Li-Cycle loan is still in the conditional phase, and no funds have been disbursed yet.
(Updates with shares in fourth graph, expanded company comment in fifth graph.)
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