It was massive news. On June 22, 2023, the U.S. Department of Energy (DOE) Loan Programs Office (LPO) announced a conditional commitment to loan up to $9.2 billion to BlueOval SK (BOSK). The announcement was big and so was the dollar figure. It still is big news. We wanted to know more, so we took a deeper dive into the BlueOval SK $9.2 billion loan. In this piece we’ll cover some of what we found, which includes interesting insight into the loan program. This piece includes some of the conditions that BlueOval SK must meet, information on some past recipients and how the money was used, and we’ll see how the loan program specifically benefits EVs and their production.

Why Is the Money Being Loaned to BlueOval SK and How Will It Be Used?

The official LPO announcement says that the loan of up to $9.2 billion to BOSK is to further expand U.S. EV battery manufacturing capacity. Specifically, the LPO says the loan will be used for the construction of three manufacturing plants to produce batteries for future Ford and Lincoln electric vehicles. One of the plants is in Tennessee and two are in Kentucky. The LPO says these plants will enable more than 120 gigawatt hours of battery production annually. It is said that this will displace more than 455 million gallons of gasoline per year for the lifetime of the vehicles powered by these batteries. Approximately 5,000 construction jobs are expected to be created by these three plants and 7,500 operations jobs will be created once the plants are up and running.

“BlueOval City is the blueprint for Ford’s electric future around the world,” said Bill Ford, Ford’s executive chair.

What is BOSK, Exactly?

What is BOSK? Well, it’s a joint venture between Ford Motor Company and the Korean EV battery manufacturer SK On. The LPO says that BOSK was created specifically to supply Ford with batteries for its growing EV product line. BlueOval SK says it is a key partner in delivering Ford’s goal of reaching an annual run rate of 2 million electric vehicles globally by 2026.

The BOSK Loan is One of Several in the Last Year

The LPO announcement goes on to say that the BOSK loan is one of several recent LPO conditional commitments under the Advanced Technology Vehicles Manufacturing (ATVM) Loan Program in the last year. The LPO also says that it has closed deals worth more than $30 billion across a variety of energy sectors in the past decade.

BlueOval City in Tennessee is designed to be Ford’s first carbon neutral vehicle manufacturing and battery campus.

What is a Conditional Commitment?

Jigar Shah, Director of the Loan Programs Office at the Department of Energy, says that a conditional commitment is a term sheet that’s approved by the DOE. It’s also approved by the partners it has around the federal government including the Office of Management and Budget, and in some cases the Treasury Department. The process for getting a conditional commitment requires the LPO to receive the application, review it, and then have outside parties’ help complete the due diligence on the project so the LPO believes that the project meets a reasonable prospect of repayment. Shah says that this results in a term sheet that can be 30 pages long. Shah also notes the term sheet is “a very complicated step to get through.” Once the term sheet is approved by the U.S. Government, it sets requirements that the applicant must complete, which are called “conditions precedent,” to close.

What is the Advanced Technology Vehicles Manufacturing Loan Program?

Earlier we mentioned the ATVM. This loan program dates to 2007 when it was authorized by the Energy Independence and Security Act. ATVM is one of three distinct loan programs administered by the LPO. It allows the LPO to loan money to support the manufacture of eligible vehicles and qualifying components. Like EV battery manufacturing plants. According to a LPO fact sheet on the ATVM, funding is available to provide low-cost debt capital for fuel-efficient vehicles and eligible component manufacturing in the United States. Note that it must be in the U.S. The program is said to have supported the production of more than 4 million advanced technology vehicles to date. Also of note: According to an un-dated ATVM fact sheet, “The interest rate for ATVM loans is the applicable U.S. Treasury rate for the term of the loan with no credit spread.”

Construction is ongoing at the Kentucky plants.

Project Monitoring is Part of the Loan Process

As we continue a deeper dive into the BlueOval SK $9.2 billion loan, we find that project monitoring is part of the loan process. An LPO fact sheet says that after loan closing, LPO monitors construction and operation throughout the life of the loan. In other words, the money isn’t dispersed and then forgotten. There’s accountability.

Ford Received a $5.9 Billion ATVM Loan in 2009

This isn’t Ford’s first ATVM loan program rodeo. The LPO notes that in September 2009 the ATVM loaned Ford $5.9 billion. According to the project summary on the DOE’s website, Ford used the money to upgrade 13 facilities, including those used to manufacture hybrid, plug-in hybrid, and all-electric vehicles. The loan was repaid in June 2022.

Nissan, Tesla, and Ultium Cells Have Received Loans

According to info found on the DOE’s website, Nissan received a $1.45 billion loan in January 2010. The LPO says Nissan built and upgraded facilities to manufacture its Leaf vehicle. The company repaid the loan in September 2017. Tesla received $465 million in January 2010. This loan is said to have been used to produce EVs and to develop a manufacturing facility in Fremont, California. This facility produced battery packs, electric motors, and other powertrain components. Tesla repaid the loan in May 2013. Ultium Cells LLC was loaned $2.5 billion in November 2022.  This money was used to help finance the construction of new lithium-ion battery cell manufacturing facilities in three U.S. states. It’s worth noting that the LPO says that these loan amounts represent the approximate amount of the loan facility approved at closing including principal and any capitalized interest.

The Takeaway of a Deeper Dive into the BlueOval SK $9.2 Billion Loan

The takeaway from a deeper dive into the BlueOval SK $9.2 billion loan is that these types of loans have been happening for years, they’re a challenge to get, and they’re monitored through the life of the loan. The result though is that the loans have contributed to electric vehicle growth on several fronts. It’s likely we’ll be seeing more loans of this nature going forward to help propel and sustain the growth of EVs.

BlueOval City, Ford’s all-new mega-campus in West Tennessee, is taking shape and preparing to build Ford’s next-gen electric truck, code named Project T3, in 2025.

BlueOval SK Has Begun Hiring for Hourly Positions

So what’s the status of the new BlueOval SK facilities? Well, at the time of this writing BlueOval SK says construction is on schedule at the Kentucky and Tennessee plants with production on track to begin in 2025. As a matter of fact, BlueOval SK has commenced hiring hourly production operators and maintenance technicians. These positions have a pay range of $21-$29 per hour and include a range of benefits. Applications are being accepted at the company’s website.