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spk00: Thank you for standing by. My name is Jessica and I will be your conference operator today. At this time, I would like to welcome everyone to the Friar Battery third quarter 2023 conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. I would now like to turn the call over to Jeff Spittel, VP of Investor Relations. Please go ahead.
spk05: Hello, and welcome to Fairbattery's third quarter 2023 earnings conference call. With me today on the call are Bergerstein, our Chief Executive Officer, Oscar Brown, our Chief Financial Officer, Jan Arbe Haugen, our Chief Operating Officer, Jeremy Bezdek, Executive VP of Corporate Development and President of Ferrer Battery US. 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 Ferrer's control and are difficult to predict. Additional information about risk factors that could materially affect our business are available in FRER's S-1, an 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'll turn the call over to Berger. Thanks, Jeff.
spk04: Good afternoon, everyone. Please join me in today's call. We'll start today with an overview of what we believe is FRER's compelling equity story. Their value proposition is based on the premise that electrification is both inevitable and reliable mass deployment in batteries. But in today's higher for longer cost of capital environments, the companies who will emerge as the next leaders of the energy transition must balance growth aspirations with rigorous financial discipline. Our team at Frere is unified in that vision of the business and we're committed to build upon a unique competitive position with that approach. With that in mind, We're excited about the opportunities we have to establish FRER as a leading developer and scaler of battery technologies across the energy storage and electric mobility sectors. As Tesla asserted earlier this year, the long-term growth potential in our core markets is profound and aligned with decarbonization initiatives, Western energy security, and accommodative public policy, highlighted by the Inflation Reduction Act in the U.S. As stewards of your precious capital, our responsibility to maintain the liquidity we need to convert these opportunities, which are punctuated by a growing universe of real options into lasting shareholder value. We intend to do that by protecting our strong balance sheet and deploying capital selectively while we advanced our ongoing capital formation initiatives, diversifying on the technology spectrum and battery value chain, maximizing the IRA incentives, and finally developing our highest return projects. Turning to slide four, let's review our key messages this quarter. As you saw in this morning's release, we're contending with the delay in our progress to fully automated production at the CQP. And we have implemented a detailed plan to address the complex challenge of scaling the 24-hour semi-solid platform. A lot of the current CQP calendar The U.S. team has rescaled Giga America to pursue the full-scale project on two parallel paths. Pack one is based on the 24M semi-solid technology, and pack two is the leveraged conventional technology. As Jeremy will document shortly, these two paths are not mutually exclusive options for the Giga America site, and they're aligned with our strategy of expanding on the battery technology spectrum. Turning to the Giga Arctic project, we have elected to minimize spending in 2024 while our work continues at the CQP and while we engage with Norwegian and European government stakeholders to establish framework conditions that place the project on globally competitive economic terms. Moving to slide five, the playbook to navigate today's high volatility environment is as follows. We're initiating a cost rationalization program to reduce our total run rate cash spending by over 50% in 2024, which will extend our liquidity runway to two plus years. Oscar will elaborate on it shortly.
spk03: While we safeguard our balance sheets, we won't be able to move as quickly as we'd like in the refund, but I want the following point to be clear.
spk04: Freer is not going into hibernation year. We will continue our important work at the CQP, and we will hold our vendors and partners jointly accountable for our progress. We're pursuing conventional technology partnerships, which will mitigate the risk to the business and open new opportunities. We will continue to fund critical initiatives that we believe will generate value for our shareholders, and we will advance our key priorities while we maintain the strategic flexibility that's necessary to thrive in today's high-mobility dynamics. Just slide six. Here's the latest on the CQP. The timeline to achieve automated production of InSpec cells has pushed beyond our previous goal of the fourth quarter of 2023. The commissioning of the casting and unit cell assembly equipment became highly complex, proving to be more difficult and time-consuming than we previously envisaged. We're attempting to scale a new battery technology with intricate next-generation equipment, which has and will continue post-engineering challenges. Our response to these challenges is to implement a plan to prevent further delays. We have implemented changes in project governance for heightened coordination with our vendors and ecosystem partners. And we are elevating the involvement of our battery subject matter experts and open relevant partners inside and outside Freire. This initiative is spared by the formation of a technology advisory board comprised of some of the industry's foremost minds, including Dr. Dan Steingart, Freire board member and co-director of the Columbia University Electrochemical Energy Center. Dr. Steingart and his fellow advisory board members are drawing on their collective wealth of commercial and operating experience to assist our team at the CQP. Let's move to slide seven for a brief overview of our technology strategies. Our strategy has always been to establish first business across the technology spectrum and to value creative adjacencies within the value chain. And we are working on that. We're pursuing conventional technology partnerships to complement 24M semi-solid, to unlock avenues to financing and commercial development, and potentially accelerate project development timelines. Conversations we're having are exciting, and they're a testament to the unique position we're establishing in the marketplace as an industrial partner of choice. The pursuit of technology diversification is intended to be complementary and anti-24M semi-solid and in no way diminishes our excitement about 24M's potential as a fit-for-purpose solution across a variety of growing use cases. Although scaling the 24M platform at the CQP is proving to be more challenging than we anticipated, we believe we have the financial and organizational resources to do it, and we believe that it's a worthwhile investment of our time.
spk03: And I'll turn to slide eight in GigaArctic.
spk04: We announced this morning that we're minimizing spending on GigaArctic in 2024 because we need to prioritize liquidity during the CQP scale-up and focus on capturing IRA incentives in the United States. We value our partners and supporters in Moirana, where the CQP remains our first operating asset and the technological heart of the company. The hire-for-longer interest rate environment and introduction of the IRA have changed the business case for GigArctic. We must operate within reality, and today the project is no longer in competitive economic terms with the opportunities that we have in the U.S. As stewards of your capital, we have a fiduciary obligation to invest in our highest-return projects, and we intend to fulfill that duty by making sensible business decisions. While we minimize spending in the Arctic in 2024, we'll continue to work with stakeholders in reaching European governments to develop framework conditions that are competitive with the IRA, with Canada's variable cost offsets, under capital spending initiatives in countries in the rest of the world, all of which are required to counter China's structural cost advantages and dominant market share across the battery supply chain. We look forward to engaging locally to promote the purchase of establishing decarbonized battery production here in Norway. In the interim, we will spend the previously committed capex in the Arctic to secure the asset to serve the option value of the project.
spk03: And with that, I'll turn the call over to Jerry.
spk07: Thank you, Berger. Please take a look at slide nine for the Giga America update. As we highlighted in the second quarter earnings call in August, Continued feedback from potential investors related to the Giga America financing has stressed the importance of technology validation at the customer qualification plan. The CQP delays that Berger mentioned have impacted our ability to close the Phase 1A two-line fast-track project financing within the previously discussed timelines. With that, the Giga America team has decided to take a refreshed look at the project and the business case. the value of the time advantage related to the fast-track project has decreased significantly, leading us to make the decision to terminate the two-line project. We see significant value in adjusting our focus to the larger project, Phase 1B, that was the original plan for the site. We believe that with validation at the CQP to come, we have the right roster of potential investors to secure the equity financing for a 24M-based production facility in Georgia. Additionally, the larger project aligns well with our DOE financing plan that Oscar will discuss. We are now working toward a potential FID of the larger 24M-based project, along with potential DOE and equity financing, at some point late in 2024. Additionally, we are pursuing a second track for Giga America, as Berger mentioned. We are currently engaged in multiple conversations with potential conventional technology partners around advancing a project utilizing that conventional technology at the Georgia site. Due to the lack of technology risk involved with that option, timing of both FID and startup production could provide us an earlier entry into the U.S. market. Our plan involves making a technology and partner selection in the near term, and we will announce that decision when that selection is made. We are excited about the opportunity to get into the U.S. market with production assets sooner, and the site in Georgia is large enough to accommodate both a conventional and a 24M production facility with plenty of room to spare. We look forward to providing you more updates on both tracks as we progress through the end of the year and into 2024. I will now turn it over to Oskar to provide a general finance update, as well as an update on the redomiciliation efforts.
spk01: Oskar? Thank you, Jeremy. On slide 10, we provide an update regarding our announcement to re-domicile from Luxembourg to the United States. This move dramatically expands our opportunity for equity index inclusion. Today, only an estimated 3% of our shares are held by index funds, paired with a peer average of over 20%. Re-domiciling has the potential to drive incremental holdings of up to 45% of our current market capitalization if we were held by all the index funds we would qualify for as well as associated actively managed funds who benchmark against those indices. Moving our domicile to the U.S. also has the added benefit of aligning FLIR with the country that has offered the highest standards for battery manufacturing at scale in the world, as well as the world's largest market for our products. The U.S. and Delaware have well understood corporate governance and disclosure requirements, and we will still be able to maintain our European strategies alongside our U.S. efforts. The transaction to move from Luxembourg to the U.S. requires an extraordinary shareholder meeting, which is now set for December 15th for shareholders of record as of October 25th. The transaction requires 50% of our outstanding shares to vote in order to ensure a quorum, and two-thirds of those shares voting must vote in favor of the transaction for it to close. It is very important that all shareholders vote. Details of the transaction can be found in filings under Friar Battery, Inc., on the SEC's website and through links on our own website. We expect to close the transaction by year end. Moving on now to slide 11, the financial update slide of the earnings deck, I will review our recent financial results. The quarter ended September 30, 2023. I reported a net loss of $10 million, or 7 cents per share, when compared with a net loss of $94 million for the same period last year. That income from last year's period was impacted by a $70 million non-cash loss on our warrant liability fair value adjustment due to changes in our stock price. This line item reflects a gain when our stock price declines during any reporting period and a loss when our stock price increases. For the third quarter of this year, we recognized a $24 million non-cash gain on this item. For the nine months ended September 30th, 2023, the company reported a net loss of $48 million, or $0.34 a share, compared with a net loss of $124 million, or $1.06 per share, in the same period last year. More importantly, the company reported higher general administrative expenses, as well as higher research and development costs for the third quarter and the nine months ended September 30th, compared with the same periods last year. Logically, this is a function of our larger organization, which has been managing more projects around the world. Looking ahead to 2024, we have initiated a significant cost-cutting and resource prioritization program focusing on the CQP and Giga America, which will significantly reduce our annual cash burn rate as we seek to extend our liquidity runway more than two years and into 2026 and focus on those two projects, all before we raise additional capital. We expect a material reduction in G&A and capital commitments in 2024 compared to 2023. In our cash investment rate and liquidity, we spent net cash of $235 million during the first nine months of 2023, which included $169 million on capital expenditures. During the third quarter, Friar spent $41 million on capital expenditures, of which $32 million was spent on Gigartic and about $7.5 million was spent on the customer qualification plant and test center. Capital expenditures were partly offset by a receipt of a $3.5 million grant in the United States. We ended the third quarter of 2023 with $328 million of cash, cash equivalents and restricted cash, and no debt. For the rest of the year, our remaining capital expenditures will focus on completing and securing the initial buildings of GigArctic, as well as completing and ramping up the customer qualification plan. Major additional capital expenditures in 2024 will be dependent on project level financing as we preserve ample burn rate and runway for the company. Our near-term priorities, again, remain ramping up the CQP, securing the initial buildings at GigaArctic, as we continue to seek a globally competitive incentives package for scaling battery manufacturing from the government of Norway, as well as progressing GigaAmerica. We provide additional guidance on capital expenditures only upon the success of the GigaAmerica initial capital raise, which we now expect in 2024, as it is tied directly to the successful automated production of batteries at the CQP and the testing of those batteries by our largest customer. While we continue to work with the Norwegian government on incentives programs, and we'll do so throughout next year, we are not currently forecasting any capital expenditures for GigArchic in 2024. We expect capital expenditures in the fourth quarter of this year will be in the $40 million range, and we expect that we'll end the year with cash and cash equivalents of approximately $250 million when G&A, R&D, and Giga America costs are included. Again, any significant capital expenditures in 2024 will only be sanctioned once new financing is secured. Given our cash balances, expected spending through the year of 2023, and our reduced cash requirements for 2024 pending any new financing, we've ensured Friar has a cash runway of more than two years. As a result, our total cash uses in 2024 will be nearly less than half of that of 2023, at least until we secure project-level financing. Slide 12 reemphasizes our key financial messages as we position the company for the current environment. Checking the balance sheet and taking actions within our control on costs and spending to extend our runway into 2026 are our key focus areas. With the actions we are taking now, we are targeting an annual cash burn rate in 2024, less than half of that in 2023, but the priority is already mentioned. This enables us to invest in some additional R&D and related items to enhance our manufacturing projects and our products, but we will proceed with those with caution as incremental technology investment would, of course, reduce our cash runway modestly. Again, we will not spend any meaningful capital expenditures until incremental financing is secured. Our pursuit of non-dilutive capital remains in high gear in this currently challenging financing environment. Given our liquidity position and our lower burn rate, we do not have any intention to raise common equity from our shareholders in 2024. As Jeremy described, project-level equity for Giga America is available. It is clearly tied to getting the CQP up and running as designed, reducing testable batteries and receiving acceptance of those batteries, which is now expected again in 2024. In parallel, we continue to progress the U.S. Department of Energy Title 17 loan for the project and are awaiting invitation to Part 2 of the process from the DOE. After receiving that invitation, we will fire part two of the application, and then the effort becomes very similar to a project financing process, which we will anyway run in parallel to ensure timely access to funds. The DOE could in theory provide for all of our debt capital ambitions, but more likely will be part of an intricate capital stack. We will keep investors informed over the next several quarters as we make progress on these efforts. Section 45X of the IRA with its annual production tax credits provides key underlying support to the financing of Giga America, unlike anywhere else in the world. In addition, we are staying vigilant for federal grant opportunities in the U.S. that could be applicable to our businesses. We'll continue to preserve the project financing option for Giga Arctic as well, and we recently announced that we were awarded a 100 million euro grant for Giga Arctic by the European Innovation Fund, the EUIF, which is an outstanding validation of our business model. The review by the EUIF has been very intensive, covering hundreds of pages of documentation over the course of the last year. We continue to work with them extensively, finalize the terms of the grant, and a relatively flexible timeline to continue the project when a globally competitive scaling incentive program is available. While we also have been grateful for the support and indications of interest expressed by all our expert credit agencies, including Accent, and the Nordic Investment Bank, the European Investment Bank, and the EU Innovation Fund, it is important to note that Friar has not received any cash from these entities so far, and all progress on Giga Arctic and the CQP to date has been made without yet having received funding from any of these entities. With Giga America prioritized in large part due to its secure returns driven by eligibility for U.S. IRA production tax credits, we'll also evaluate partnership-based upstream opportunities, address decarbonization of the supply chain, and leverage and grow our energy transition acceleration coalition, the ETAC, and other industrial partnerships where possible. With that, I'll turn it back over to Berger for additional comments.
spk04: Thanks, Ulster. Before we take your questions, let's close with a look at Freer's path forward on slide 13. In today's high discount rate environment, cash is king. We have a clean balance sheet with no debt, and we're reducing our costs to extend our liquidity runway to two-plus years and beyond. We will not authorize any significant new topics in 2024 until new financing is committed. We are pursuing conventional technology partnerships, advancing the redomiciding to the U.S., regressing through the commissioning and 24M scale of processes at the CKP. We will communicate news on all three fronts with the investment community as things develop. Our partnership approach to industrialization is generating dozens of interesting strategic conversations with our customers, with members of the Energy Transition Acceleration Coalition, and other partners, all of which are focused on commercial opportunities, catalyzing Freire's next wave of capital formation. In Norway and Europe, we're working with key stakeholders to establish a globally competitive incentive program while we preserve giga-arctic's option value. And finally, we're executing our strategic plan with clear priorities. And as we have learned over the last two and a half years as a public company, adaptability is paramount to succeeding in a highly volatile environment. I'll conclude by emphasizing our appreciation for the continued support of our investors and all our partners in our mission to decarbonize energy storage and transportation systems by producing the world's cleanest batteries. The FAIR team is unified in our purpose, and we're dedicated to rewarding your faith in us on this exciting journey. And with that, I'll turn the call back to Jeff, and we'll take your questions.
spk05: Thanks, Ferger. Operator, ready to open the line for Q&A.
spk00: Great, thank you. At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. And your first question comes from the line of Adam Jonas with Morgan Stanley. Adam, go ahead.
spk08: Thanks, everybody. And appreciate the extra details on the cash outlook. That's helpful. But so much of the story really does rely on the technology of 24M. So at a high level, Berger, how much of Freyer's success is tied to 24M. If this turns out to be a dud, and I'm curious, when would you potentially be in a position to understand whether 24M really is scalable as you originally anticipated or not? Because it does seem that everything else kind of triggers off of that. And I appreciate the diversification strategy, but it's important for shareholders to know how tied the entire story is to 24M specifically. So if you could, I realize it's a qualitative question, but I would appreciate your impressions, please.
spk04: Sure, sure, Adam. First, as you indicated, we think those two tracks we've now indicated towards getting started in Giga America is one track where we have some technology risk, we'll talk more about it in a second, you have geopolitical advantage and very low risk. Then pursue another back, which will be licensing conventional technology with essentially the opposite characteristic. Some geopolitical risk, but very low technology risk. So two unformated paths, if you will. Then inside of the 24M path, I think, fair to say that as we progress towards the last commission packages that we're delivering in the CPP and getting ready for production we're also getting into some of the harder stuff and it's also fair to say that we are discovering aspects of our chosen solution that might not have had the technology readiness level that we would have anticipated in making the choice and until now in fact That's just a part of the data we're at now, very difficult to foresee up front. All of that said is we haven't discovered anything that says this is not a viable way to get to a scalable automated cell reduction. And we think we see a path through to that. We're making a few changes to make sure that we de-bottleneck and unblock that path. We continue to have, and I think we've spoken about before, the delivery of sales in an automated way at the CQP as company priority number one. And along with selected members of my leadership team, I start every day at 9 a.m. with a daily follow-up call to make sure we remove all blocks from the path in front of that. We have all fair battery talent now engaged at the CGP. We might have been more diverse in terms of our priorities previously. We have key vendors like MPAC, 24M, others on-site. MPAC is running double shifts, and we have a threshold for getting more help on-site if we discover that we need it. We're aligning with other semi-solid licensees. We have people onsite with several of them and making sure we learn the most or the maximum from the other people who've gone before us and that we share experience with those who are traveling at the same rate of speed as we do. And we've also involved both the customers and vendors directly into our daily stand-up follow-up meeting here. So through all of this, we've created a lot more transparency We have a very few of the runway ahead of us, and we are solving problems every day, but at the same time, we're getting, as I said, closer to the more difficult part, and that's what's extended, as we call it, the extension on the timeline here. If we had a conclusion here that said this is not going to be viable, we would, of course, have shared it, and I'd say, based on the input of our technology advisory board and some of the discussions that we're now conducting continuously, If anything, we're strengthening our belief that there is a very interesting technology path ahead of us, both in the current configuration of the CPP and the future generations of the sinus salt.
spk08: Thanks, Berger. And just to follow up on the runway discussion, I was going to ask whether the two-year-plus runway began at the end of the third quarter or the end of the fourth quarter, but I think, Oscar, your comments about getting into 2026 answers that question, just confirming that. Yes, yes, Adam, thanks. Oscar, also, I want to know whether that two-year plus bakes in a minimum cash level to run the business for payroll, expenses, etc., or whether that was a mathematical, you know, down to near zero cash flow. Sorry for the housekeeping there, but just wanted to assume whether you had a minimum cash in there, and if so, what that would be, and then what specific cost cuts are required, you alluded to in the release, that you would take in addition to pausing the CapEx subject to project financing or funding, what OpEx cuts are being considered, and are there any upfront costs related to those cuts? What I'm trying to get at, Oscar, is, is the two-year plus runway a really conservative base case, something you really have line of sight to, and that's achievable, and is that base case, or is it kind of more of a stretch goal? Thanks.
spk01: No, great questions, Adam. Thank you. So a couple of things. So just reconfirming, yes, the runway, 250 starts at the end of 2023, and our runway extends into 2026. The amount of cash you need is to hold on the balance sheet to sort of run the business like a working capital is very low. So that's not significant. Just responding from a burn rate perspective, we'll have the quarterly burn rate well under $30 million a quarter. Also keep in mind, when you look at 2023 and our cash spending, the largest component of that was the big Arctic. that we're pausing now until we get any kind of new financing related to that. So that's a significant piece of the puzzle, but clearly at this more focused level of activity with the CQP and then Giga America Development and the ones that Burger mentioned, that requires a different organization. So we are looking at the organizational structure. We've made a lot of progress on that. So we're going through that process there. So this is not an aspirational goal. This burn rate reduction is happening right now. And so we're pretty confident, very confident in that.
spk04: I think we're not providing numbers on headcount today, Adam, but the The priorities that the company was pursuing up until quite recently were more than what we have now. We're laser-focused now on delivering sales and expanding runway and keeping optionality around our companies. And that's going to allow us to take down quite dramatically without impacting our key priorities. So that's what we're doing. We've had all-hands meetings across the company today. There's capital perhaps unfamiliar territory from some of you, but there's a fairly straightforward process of running reduction-in-force processes in Norway, where we have most of our staff who are well-advanced in executing on those, in accordance with local regulation, and with no barriers in their part. So this is, as Alper said, not aspirational. This is stuff that's in action in process work.
spk08: Thanks, Berger, and thanks, Oscar. Just one last follow-up, just to clarify on my second question. I'll finish the questions here. The time to get to $30 million per quarter burn rate, is that something that would take a couple of quarters to settle on, given perhaps some adjustments to get there, including some one-time payments? I don't know if you had an idea of when a $30 million burn burn rate would be achievable within presumably sometime in 24, but I didn't know if it was the first half was achievable to get there. Thanks.
spk01: Yeah, thank you. And so reemphasizing, the burn rate will be below $30 million a quarter, and it will be as of January 3rd. We will take a small kind of single-digit one-time charge related to severance, but you'll see this out of the box in Q1. To be very clear, January 1, Q1. Thanks.
spk00: All right, great. Your next question comes from the line of Tyler DeMatteo with ETIG. Tyler, please go ahead.
spk10: Yeah, good morning, everyone. Thanks for taking the time and the questions. I wanted to follow up on some of the comments and the prepared remarks related to the CQP and the plans to prevent further delays that you highlighted, some comments from partners and vendors. I'm just curious, how are you thinking about maybe leveraging more of your partners and vendors to ensure or at least kind of really work through some of the challenges of the CQP that's undergoing right now? Just how can you really leverage some of those partnerships as you go into 2024? Really, any other color there?
spk04: Yeah, it may be too much sausage making, but we have, as I said, every morning we get together and look at the critical path progress versus 24 hours ago. And we have key partners and vendors involved once or twice a week, but every week. And those calls, we also go through detailed plans on the part of the vendors, detailed expectations on the part of the customers. And we have... the subject matter experts from all three sides engaged in problem solving where we identify a roadblocks and to remove barriers for the team on the ground. And this is, it's really creating that full right to left transparency. We also share this throughout the facility. So there's a lot more eyeballs on potential issues and also solutions as we go than we've had previously. So quite a bit of changes in operating model and all of them related to unblocking and de-bottlenecking progress towards first cells.
spk10: Okay, great. And then just at a higher level here, kind of given some of the delays at the CQP, I mean, does this change how you think about maybe ESS versus EV, realizing that ESS was always the core near-term approach? But I mean, does this dynamic now change given the current state of play? And if so, how?
spk04: I think the... Semi-solid technology was always a very promising technology as it relates to producing thick electrodes and thereby achieving the electrochemical properties you want for applications like ESS. So if anything, our conviction that this is going to be a very good market for the technology we're advancing and strengthening. And we're just going to keep executing towards that.
spk10: Okay, great. Thank you for the time, buddy. I really appreciate it. I'll turn it back to the queue.
spk00: Great. Thank you so much, Tyler. Your next question comes from the line of Gabe Dowd with TD Cohen. Gabe, go ahead.
spk06: Thanks, everyone. Thanks for all the great detail this morning. I was hoping we could maybe level set Giga America again. So going back to the original plans, could you just remind us what the capacity targets are for both tracks, and then any color you can give. I know a lot has to kind of go right from now until then, but any updated thoughts now on start of production from Giga America? I think the fast track plan was two and a half gigawatt hour capacity by the early starting production by the summer of 25. So maybe just level that in and give us a little bit of an update on the initiatives now at GigAmerica.
spk07: Yeah, so this is Jeremy here. Gabe, thanks for the question. Some of this is still being worked as we're refreshing the business model, but let me give you some thoughts. So on track one, as it relates to the 24M technology, because we are in the DOE process, the timeline to sort of closing the financing, the equity will likely line up with the DOE process. And so that'll kind of dictate when we close, when we close, Financing, which then allows us to, you know, order the long lead equipment and then that will take the start of production. So as we think about the DOE process for the 24M plant. That's likely to take us through most of 24. We hope to be able to get a conditional commitment before the end of the year. If we're able to do that, we believe the equity financing will line up quite well with that. We will, of course, you know, feel good about where we're at in the CQP and be able to move forward with ordering long lead equipment. And then that puts us in a start of production late 26. From a capacity standpoint, again, still sort of working on this. It has somewhat to do with how we end up designing the process, which of course will be educated again coming out of the CQP performance. So my guess is you're probably looking at anywhere from 15 to 20 gigawatt hours of capacity in that kind of a plant, but of course that will be a bit TBD still. So we should be able to report more on that as we get into the early part of 24. On the second track, timing is a little bit more certain because of course you have, as Berger said, you don't have any sort of technology risk, but we are working with multiple partners to try to lock down terms around licensing the technology. And assuming we can do that in a short term period, it's gonna allow us to likely beat that start of production timing I just mentioned for track one. with the Track 2 plan. And then really no way to really comment on capacity yet on Track 2. That's still being negotiated, obviously, with the potential license partner. So more to come on that.
spk06: Thanks, Jeremy. That's a great caller and super helpful. Maybe as a follow-up then, can you talk a little bit about what you may be looking for in a tech partner? I'd imagine it's someone who with LFP chops, if you will, just considering the market focus on energy storage and anything else that maybe you're looking for in a tech partner. And then maybe specific to NIDIC, could you pivot and could track two or phase two, I guess, be the sole source of supply for NIDIC? Like NIDIC doesn't necessarily care if it's 24Ms. Is that correct?
spk07: Yeah. So let me answer your first question first. As far as the conventional technology partner, I do think we want to focus around LFP, and I also think we want to continue to focus on the ESS market. As Berger mentioned, we're excited about that market. We're excited about the growth opportunities there and, frankly, the speed to validation with customers. And so that's important. So I think that would be – the way I would characterize our – potential conventional technology partners. As it relates to NEDAC, the one difference here for them as our, you know, module and PAC partner is the 24M cell design is different than a conventional cell design. So it will be two different module designs that go with that. So we're working very closely with them on that. both track one and track two. And so, you know, the way we would envision the relationship moving forward is to, you know, be as transparent as possible on what cell design looks like so they can follow with module design and get us into a DC block product, which we think the market desires.
spk06: Okay. Okay. Got it. Got it. Great detail. Thanks, Jeremy. Thanks, guys. Thanks, Kim.
spk00: Thank you. Your next question comes from the line of Alex Grapple. Alex, go ahead.
spk09: Hey, guys. Thanks for taking my question. I'm curious, you know, with the sort of rejiggering of plans here towards Giga America specifically, how are you guys thinking about the offtake environment for ESS? Moving forward, it seems like almost when you came out, we were kind of in one very panicked environment. Today, we're hearing something really different from buyers. They're seeing rather steep price cuts in ESS. They're much more confident on supply, I mean, specifically to the U.S., So relative to sort of either track one or track two, my understanding is you do need to show some offtake to get through the DOE loan process. How are you thinking about the contracting environment in ESS and sort of like what underpins your excitement looking at it today versus, say, two years ago? Thanks.
spk07: Yeah, thanks for the question, Alex. I'll take a stab at that, and then if anybody wants to join in, feel free. You know, the client demand drives price, right? And so, yes, it'll be a cyclical market. We know that. We still believe that the ESS market, the growth potential is strong. And so we do feel like there will be periods where, you know, there are significant margin and there'll be periods where there are tighter margin. And that's why relying on You know, the competitive advantage that we can build into both our scale and our technology partners is going to be helpful as we, you know, survive the cyclical nature of what will be a commodity type market. So no concerns about today's market. Feel very strongly still about ESS growth. As it relates to offtake, yes, there will still need to be offtake in either track, no question, to secure the financing that we need. And we feel pretty good actually about many of the relationships that we've established, not just with NEDEC, but with others as well. And we hope as we kind of continue into 2024 and we start to line up the alternatives with both tracks that you'll see, and actually this isn't a hope, we believe you will start to see some additional offtake announcements happen.
spk04: Yeah, I guess just for clarity, we haven't heard any objections when it comes to the LTSAs and moving volumes between GigaArctic and GigaAmerica. And the other note I'll make is the notion of a Western technology-based ESS solution has a lot of enthusiasm in the market. We're getting very strong responses in trade shows and elsewhere on that concept. So coming with a technologically de-risked solution and a geopolitically de-risked solution seems like a really winning combination. Yeah.
spk09: Got it. You already answered part of my follow-up as far as the transferability of offtake across the Atlantic. But maybe a follow-on, right, Berger? You've alluded to sort of the technology versus the geopolitical risk. Obviously, there are some large players today that are licensing battery technology from various parts of the world that's been contentious in certain cases today. I'm curious how you think about that sort of track to, you know, what are you looking to see? Again, you just mentioned sort of a U.S. platform, and I think that there's, you know, sort of consequences or ramifications that go along with that. How are you thinking about that specifically relative to, you know, some of the things you've already seen as far as, you know, the U.S. reshoring, but also not necessarily having these core technical capacities as others do in the rest of the world? Thanks.
spk04: That kind of goes to the conclusion again, right? Because in an environment where you get a lot stronger, a lot stricter restrictions on the origin of your IP or your process or the ownership of the asset or the license store, clearly the 24M solid, semi-solid platform is going to be significantly advantaged. And conversely, an environment that sort of doesn't go farther in that direction the de-risk through a high maturity dimensional LFT solution is going to be advantaged. So I think we can play to both sides of this argument. That said, we're of course paying very close attention to it. We're spending time in D&C to understand what might be percolating and staying close to the people who might be providing non-diluted funding for us to ensure that we have a good picture of the risks.
spk09: Got it. Makes sense. If I could just sneak a quick follow-up, just on the effective, I guess, capital plan for GigaArctic, I think you guys talked in the past about your ability to cold stack. Just wondering if there's any ongoing costs beyond capital that we should be aware of with where the plan sits. Currently, I understand that capital could resume with some financing coming in the door, but just curious if there's any additional costs that we should be aware of there. Thanks.
spk04: We see the cost of keeping the Giga Arctic option alive and possible to hot start, as it were, somewhere between $3 and $4 million a year. So not significant in our runway perspective, as we've discussed it.
spk03: Got it. Thanks. That's super clear. Take the rest of that one.
spk05: Thanks, Alex.
spk00: Great, thank you. Your next question comes from the line of Jose Azumendi. Jose, please go ahead.
spk02: Thank you very much. I want to come back, please, to slide six. Can you maybe just provide a few more details with regards to what's going on on the ground? Like, what are the changes you're doing to, you know, as you see on the slide, further prevent further delays? And can you elaborate a little bit more on this dedicated technology advisory board? Thank you very much.
spk04: Yeah, so our technology advisory board is chaired by our board member, Dr. Dan Stangard out of Columbia University. And just this last month spent time on the CQP with our, of course, our technology team as well. And As I alluded to previously, we're also strengthening and we will continue to strengthen our own in-house technology muscle to ensure that we rebuild our own ability to scale, not only in this permutation of semi-solid, but also in the next permutation. So that's what's going to... bear out our confidence that the semi-cellular platform is the right bet for a Western hemisphere-based set of IP for battery cell production. In terms of what we're doing every day, I guess I probably could invite you into our morning meetings and you'd see all the cell search making, but I'm not sure how that would play. Rest assured, this is taking up the attention span of of the key people in FRER. We're all on this on a daily, if not hourly basis.
spk02: Thank you.
spk00: Thank you. Just as a reminder. Sorry, go ahead.
spk05: Go ahead, Jessica.
spk00: Just as a reminder, if you would like to ask a question, please press star one on your telephone keypad. And we'll pause for just a moment to let any last questions come into the queue. Okay, there's no further questions in the queue. So with that, I will turn the call back over to Jeff Spittel, VP of Investor Relations. Jeff, go ahead.
spk05: Thank you, Jessica. Thank you all for your time today. Please follow up with us. I know we have additional questions and we will get to all of them. So reach out to me and we'll put some time on the calendar. And then we look forward to seeing a number of you in person on the road and virtually over the next several weeks. Thanks for your time. And this will conclude the call.
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