Welcome to the FREYR first quarter 2023 earnings conference call. My name is Bruno, I'll be the operator for today. During this presentation, you can register to ask a question by pressing Star followed by one on your telephone keypad. I will now hand over to your host, Jeff Spittel , Vice President, Investor Relations. Please go ahead.
Good morning, good afternoon, and good evening. Welcome to FREYR Battery's first quarter 2023 earnings conference call. With me today on the call are Tom-Einar Jensen, our Chief Executive Officer, Jan Arve Haugan, our Chief Operating Officer, Oscar Brown, our Chief Financial Officer, and Jeremy Bezdek, President of FREYR Battery U.S. and EVP of Global Corporate Development. 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 FREYR's control and are difficult to predict. Additional information about risk factors that could materially affect our business are available in FREYR's Form S-1 and 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 Tom.
Thank you, Jeff. Good morning, good afternoon, or good evening, wherever you might be around the world. Again, it's a true honor and pleasure for us to present this first quarter and 2023 earnings call. This is now FREYR's eighth earnings call since we went public on the New York Stock Exchange on July eighth, 2021, which is less than two years ago. We will take you through all the notable updates since our last earnings call. This is yet another quarter with significant milestones achieved in a highly dynamic environment. With the commissioning of the CQP, momentum is even stronger than before on multiple fronts. Today, we will take you through the activities in February with a core focus on the activities at the CQP as we move towards first battery production.
We will also dive into specifics around Giga America and the emerging response from Norway and the European government in response to the Inflation Reduction Act. There is a distinct and growing realization from regulators around the world that the energy transition is increasingly urgent, and that it can only happen with large volumes of batteries included. Batteries are indeed becoming the new oil, and decentralized, decarbonized, and democratized battery supply is becoming the most significant business opportunity in the decades to come. Today, we will show you that we continue our relentless journey towards a deep industrialization partner of choice strategy on both sides of the Atlantic as we enter into the production phase of the SemiSolid production platform. Seven weeks ago, FREYR had opened up our Customer Qualification Plant in Mo i Rana, Norway.
This marked the start of the commissioning of a world first next-generation battery production facility at gigawatt power scale. I am very proud of the team in FREYR who have built and commissioned this facility in less than two years in the middle of a global pandemic, supply chain disruption, market disruption, and inflationary pressure. Building a battery company is not trivial, but we are now deep into commissioning this highly advanced industrial-scale production line of next-generation battery solutions. Every day, our dedicated experts are punching out discrete commissioning and test packages, and we're closing in on 80% completion in a matter of only a couple of months. I want to remind our investors that commissioning mega projects, be it an oil and gas platform, an aluminum smelter, or in our case, an industrial-scale battery facility, is very time-consuming, but also absolutely Standard Operating Procedure.
FREYR is, however, deeply cognizant of the core catalyst for the company's further development. I'm very proud to see that we continue to progress according to plan. However, in a matter of weeks, this facility will be producing the first batteries through active anodes and capsules combined together to form our first produced chargeable battery. We will, in a gradual, careful, but relentless manner, increase production of battery cells, increase speed of production, increase yields, increase off time, reduce scrap rates, and improve battery design over time. While we are impatient in our quest for producing world-leading batteries, we deeply respect the vastly complex and integrated challenges battery production represents. Our Chief Operating Officer, Mr.
Jan Arve Haugan, who has been responsible for building and operating multiple oil and gas platforms in the North Sea and the world's largest aluminum smelter in Qatar, will today take you into the specifics of this. Moving forward, we aim to regularly provide our investors with deeper technical data to support increased understanding of the very exciting and critically important, but still reasonably nascent battery industry. Catalyzed further by the extremely favorable Inflation Reduction Act, I'm equally pleased to announce that we today are providing details around our Giga America project, and we're now targeting 38 GWh in nameplate capacity in a phased development with final investment decision targeted later this year.
We target SOP for this project during the summer of 2025. We're advancing fast forward in our project level equity efforts with a broad range of strategic and financial investors for the initial phase of the project. Our President of FREYR Battery U.S., Mr. Jeremy Bezdek, will take you through the details of this highly valuable asset, which have initial value estimates of up to $8 billion after tax for this 10-production line project. Jeremy, in his role as EVP of Global Corporate Development, will also take you through the amazing progress we are making with strategic partners through a deeper dive into our recently announced Energy Transition Acceleration Coalition. I'm also very pleased to see that the EU's response to the Inflation Reduction Act is starting to yield significant results, with Germany, France, and Spain announcing billion-dollar support packages late last week.
Norway will provide solutions deeply aligned with EU's response. FREYR is in pole position as the leading battery company in Norway, and we have strong signals from an integrated dialogue with the Norwegian government. Norway's national battery strategy, which was launched in June last year at the Giga Arctic site. Based on recent formal feedback from the Minister of Trade and Industry, we are optimistic that the strategy will turn into action before the summer. Jan Arve will take you through how we are continuing to develop Giga Arctic, which is emerging as Norway's largest land-based industrial project, and therefore a catalyst for the energy transition in the country. Finally, I'm very pleased to announce FREYR's inaugural Capital Markets Day, where we will host our investors on the New York Stock Exchange on June 27th, later this year.
During this event, we will, among other things, dive in a live way, stream from the Customer Qualification Plant to showcase battery manufacturing live at the SemiSolid production platform, deep dive into technical milestone and catalysts, provide in-depth reports on our increasing and accelerating strategic, commercial, and financing efforts. Let me take this opportunity to remind our investors about the unique exposure FREYR offers to the accelerating and largest secular shift in Homo sapiens history. FREYR was founded based on the notion that clean battery solutions is the core catalyst for the urgency required energy transition. In a world where the ambition is to limit global warming to 1.5 degrees C relative to current trajectories of almost twice that level, more than 70% of all decarbonization efforts have batteries included. Let me say this again.
More than 70% of all decarbonization efforts have batteries included. Everything that can be electrified will have to be electrified. It will not happen without batteries, enormous amounts of them. This same world is one where regional energy security and resiliency is increasingly required, while we still find ourselves in a situation where more than 80% of all battery and battery material supply is coming out of China and Asia. Analysts, estimators, others are systematically underestimating the required pace of change. Regulators are increasingly playing catch up to targets like Fit for 55 and other ambitions. The Inflation Reduction Act and the Temporary Crisis and Transition Framework in Europe is not a subsidy war. It is a recognition that we need a step change in deployment of clean technologies if we're going to be in striking distance of safe temperature levels for mankind.
With this backdrop, FREYR is partnering with global companies across the entire battery value chain, which not only represents massive commercial opportunities for the company, but also combines with constant improvement in cost position over time. The lithium-ion battery is a technology, not a fuel, and it will therefore constantly improve through learning curve effects. While every battery that will be produced will be sold, FREYR has taken a position with a technology which offers step change in performance and cost while offering deep additional improvement potential over time to ensure that we can always stay at the left-hand side of the cost curve. Now that we are starting operations of a highly automated and significantly simplified battery production process through the 24M platform , FREYR intends to accelerate the development of its proprietary in-house development of AI and digitally enhanced simulation system.
Battery design and production represents the next frontier in AI-supported production, with the potential to dramatically improve future battery cell performance, as well as testing and production lead time in deep collaboration with globally leading companies such as Siemens and its partners NVIDIA and Amazon Web Services. As a New York Stock Exchange-listed company, we are now entering into a very exciting period with multiple near-term catalysts that should be welcome from our investor community. As one example, the value from the Production Tax Credits under the Inflation Reduction Act for our Giga America phase I project alone has a value of close 2.5x FREYR's current market capitalization. The value from the project comes on top of this.
The responses from the European Union will generate additional triggers as we enter into live battery production, converting existing conditional off-take agreements, lock in competitive non-dilutive financing, and build production capacity in multiple geographical regions. We are now a company with an operating battery facility. We're creating real optional value. We are as excited as ever about the future. However, all of this is obviously based on our ability to produce high-quality batteries at high speed and low cost. With this, let me now hand it over to Jan Arve Haugan, our Chief Operating Officer and President of FREYR Battery Norway. Jan Arve, over to you.
Thanks a lot, Tom. Hello to everybody listening on the earnings call. I'm now going to give you the latest update on our operations. As a regular and reoccurring topic, safety first. I'm glad that I can say that we have another quarter without any reported serious safety incidents. However, we have reported 1 incident of high potential in late April, in addition to the 3 that we had reported in the first quarter. All 4 high potential incidents or HiPos, as we label them, were related to lifting operations by subcontractors at the construction site in Mo i Rana. The last one was a steel beam weighing 400 kilo that came in contact with a boom lift and fell to the ground from a 3.5 meter height level. Luckily, nobody was hurt.
Investigations of these incidents are carried out by independent experts. We are openly sharing the key evaluations and learnings with all our contractors and partners. We are now intensifying our efforts to gather reports of unwanted incidents to enhance our ability to predict potential safety risks in the future. We have currently around 170 people working at our two sites in Mo i Rana. Approximately 70 of those are at the Customer Qualification Plant and close to 100 at the construction site for Giga Arctic. We plan to sustain that level of activity until the summer vacation in July. Our operations group comprises nearly 50 individuals in Mo i Rana, representing 16 nationalities. We have been transparent in our previous earnings calls that we are not immune to the challenges that we face.
We have a complex deliveries from 16 different global suppliers. These suppliers were performing individual Factory Acceptance Tests. We are now well into the final Site Acceptance Testing after having installed and mechanically completed these 35 production line machines. We have also put in place 31 systems related to the building and infrastructure, which is tailor-made for the battery factory. The complete Customer Qualification Plant is divided into a total of 388 discrete commissioning and testing packages. These are all individually verified against the technical specifications. Any deviation and/or needed corrections are uniquely tracked in our comprehensive project completion system.
We utilize a work process and system tool that has been implemented as a copy-paste from the most complex and challenging offshore and international industry projects delivered by our project execution experts that have in-depth experience with this type of methods in the system. Currently, 396 of the 388 discrete test packages has been completed and are being handed over to operations team. As we speak, the ramp-up of powder handling and slurry mixing is gradually picking up efficiency. This is a careful and defined process where the predefined Standard Operating Procedures are verified and updated based on collaboration with own process operators and instruments from the respective suppliers.
A total of 277 Standard Operating Procedures are defined to run the production line with 15 operators at day shift and 9 operators at the second shift when the plant is gradually moved from semi-automatic to fully integrated operations. The integrated control room will be able to collect data from a total of 5,100 digital sensors in the plant. Safety and loss prevention design is built into the control system, in the initial phase, we realize that there will be interruptions that will occur due to alarms from sensors that needs to be fine-tuned and calibrated in order to meet the cause and effect design that we have defined. South Korean contractor Hanwha Vision did complete the commissioning and the Site Acceptance Test in the formation and aging section.
Now operations team has taken over the control of this part of the plant. In the last month, all upstream system, that is from the warehouse through the powder handling, slurry mixing, and into the cartridge filling station, have now been commissioned and handing over to operations are in good progress. Operations are currently running powder handling and slurry mixing based on an inactive solvent, pending the introduction of active electrolyte into the slurry. That is the main feature of the 24M technology. The core equipment of the SemiSolid production platform is the casting and unit cell assembly delivered by Amp Atlantis in the U.K. As noted previously, this is the delivery on the critical path towards the first battery master. As of today, the assembly are mechanically completed and sequential tuning of the integrated unit is ongoing.
This is a complex activity, all measures are taken to avoid any damages of the precious mechanical equipment. On the next slide, you will see the latest update from Giga Arctic construction site. Since our last market update, the city contractors have continued the operations, the erection of the production halls in Mo. The photo at the left is from the November last year. At right you can see the latest drone picture. The building and infrastructure contractors are continuing at the upstream buildings on the picture. Project engineering is continuing with Front-End Loading of the design of the production line equipment, with focus on more detailing of the integrated production control system, now with the support of the Siemens digital experts following the frame agreement signed last month.
Finally, before I give the word to Jeremy, please let me again use the opportunity to note that our ongoing field engineering, our production line equipment and continued design development of the Giga Arctic is managed in close cooperation with the scoping of Giga America plant. Currently, FREYR has strengthened the integration and interaction between Norway and the USA activities by virtual collaboration in the data models for first pre-engineering and project execution planning for the phase plant development in the U.S. This was the operational update of today. Now I give the word over to Jeremy for an update on Giga America.
Thank you, Jan Arve. It is definitely an exciting and interesting time to be in the energy transition space, and specifically with the great opportunities that are in front of us as a company. The strategic partners with which we are involved bring capability and momentum that help us define our role and pursue success in this generational transition. As we discussed in February during our fourth quarter update call, we were evaluating options to accelerate the Giga America project. The team over the last three months have devised a project plan that will enable us to bring 2.5 GWh of capacity online by the summer of 2025, followed soon after by the larger plant that we have been discussing previously with the start of production during the summer of 2026.
We are labeling the combination of these two projects as phase I, as we of course have additional visions of growth for the Giga America business and specifically for the Georgia site. We are dividing phase I into phase IA and phase IB to reflect the two different financing processes with different start of production timing. The total capacity of the cumulative phase I is 38 GWh, as Tom had mentioned before. To fund the CapEx needed for phase IA, we have initiated a formal process, working with a financial advisor, where we have engaged multiple strategic partners within the FREYR ecosystem as potential strategic investors at the project entity. We are striving to fund all the CapEx requirements of that phase through this formal funding process.
Currently, we have multiple parties in the data room and conducting due diligence. We hope to be able to update our progress over the coming weeks and months. We have completed the financial model for the entirety of phase I, broken out between phase IA and phase I B. The NPV and returns of the projects are quite attractive. Phase IA, which includes a process design upgrade that we plan to do after completion of the 1B project, is modeled with an estimated NPV of over $1.4 billion. We believe phase IB will generate an NPV of $6.6 billion. The total NPV of the phase I cumulative project sits at $8 billion, with two and a half billion of that projected NPV coming directly from the Production Tax Credits defined in the Inflation Reduction Act.
We believe the generation of these credits specific to the energy storage market in which we participate are well defined, with the remaining uncertainties related to the EV credits. We are also confident in the certainty of the IRA program seeing its way to completion in 2032. As you can see from the numbers, even without the Production Tax Credit, the Giga America phase I project is economically quite attractive. I would like to make one final point to clarify the phase I A investment process we are undergoing, currently detailed on Slide 10. We are raising money at the project level entity, which will be a company that sits below the U.S. holding company within the FREYR corporate structure.
We believe it's attractive for our strategic partners to own project level equity. We believe this is also attractive to shareholders of FREYR at the public entity level due to the significantly less dilution that occurs with this strategy. We will continue to define the project scope for phase I A of the project, hoping to accomplish the final investment decision by early fall this year. This FID timing will coordinate well with the timing of the fundraising process. I also wanted to speak briefly about the Energy Transition Acceleration Coalition that we announced at our Chapter One event in Norway at the end of March. We are fortunate to have strategic partners such as Glencore, Caterpillar, Nidec, and Siemens participating with us in this coalition. We are all aligned that the acceleration in scaling clean battery production will be key to advancing the energy transition.
Since the initial announcement, we have had multiple inbound conversations with additional partners that expressed an interest in the coalition, and we are currently working through a selection process to add some additional names in other key parts of the value chain. We are kicking off the steering committee for the coalition at the end of May, where we will be identifying key work streams that will be attacked by members of the partner companies within the coalition. We will be taking on problems and opportunities that exist across the battery value chain with a collective effort to solve them faster, while also identifying commercial opportunities for each of the members of the coalition. We will continue to provide updates on the progress of the coalition regularly as we move forward. Thank you for your time today. Jan Arve, back to you.
Thanks a lot, Jeremy. Now to Slide 12. Our team managing our strategic sourcing progressed further in securing our raw materials. For our CQP, all materials are secured. Materials for the ramp-up are now stored at our warehouse in Mo i Rana site. FREYR has increased efforts in developing a more regionalized supply chain as we reflect on the risks related to global supplies or raw materials to the battery production. Sorry. FREYR has increased effort in developing a more regionalized supply chain as we reflect on the risks related to the global supplies or raw materials to the battery production. As noted in the previous earnings calls, FREYR has a joint development agreement with Finnish Minerals Group of Finland.
The ambition of this partnership is to develop a business case for an LFP plant outside the city of Vaasa in Finland as a common approach. We have also secured a major share of our raw materials needed for the Giga Arctic. To prepare for Giga America acceleration, we have started the process to secure volumes by approaching close to 20 suppliers, including some of the U.S.-based. Extending, expanding our contracts made already for Giga Arctic to global supply contracts, including Giga America, has been our focus. Our suppliers are reacting very positive and see that this is an additional chance for them. Thus, we expect that we can and will secure raw material contracts for Giga America before the final investment decision.
As can be seen from this slide number 12, we are in dialogue with several suppliers for alternative sourcing and the technical qualification of alternative products and materials is well underway in FREYR's own lab facilities in Fukuoka, Japan, as well as in collaboration with 24M Investment. With this, I hand the word over to Oscar, who will give us a final financial update.
Great. Thank you, Jan Arve. Moving now to Slide 13, the financial update slide of the earnings deck. I will review our financial results for the first quarter of 2023, as well as provide an update on our financing initiatives. The first quarter ended March 31, 2023. FREYR reported a net loss of $13 million or $0.09 a share, compared with a net loss of $35 million for the same period of last year. The net loss improvement for the company's most recent quarter compared to last year was a result of a slight positive non-cash gain on our warrant liability fair value adjustment due to changes in our stock price from the end of the year versus the first quarter and a non-cash loss last year.
In addition, the company reported a $16 million foreign currency transaction gain for the first quarter of 2023 on the back of a strong U.S. dollar versus a slight loss for the same period in 2022. More importantly, the company reported higher general and administrative expenses as well as higher research and development costs for the first quarter compared with the same quarter last year. Logically, this is a function of our large organization, which is managing more projects around the world. The first quarter of each year is also cost-heavy compared with the remaining quarters of the year due to costs related to year-end audits and other one-time costs and accruals.
For the full year of 2023, we continue to expect our overhead costs to remain around the previously disclosed run rate of less than $95 million per year at the company's current level of activity. This activity is supporting the accelerated development and project-level financing of Giga America, completing and ramping operations of the Customer Qualification Plant, continuing the measured pace of progress at Giga Arctic and its related financing and other business development activities. Regarding our cash investment rate and liquidity, we spent net cash of $88 million in the first quarter, compared with $107 million during the fourth quarter of 2022 and $41 million a year ago in the first quarter of 2022.
We ended the first quarter of 2023 with $475 million of cash equivalents, and restricted cash and no debt. As shown on the financial update slide in the earnings deck, naturally, cash was spent on corporate overhead, operating expenses, and Capital expenditures, primarily supporting the Customer Qualification Plant in Giga Arctic, the early development activity at Giga America, and other business development activities. Capital expenditures of $64 million were split roughly 25% for the CQP and test center and 75% for Giga Arctic. Remaining Capital expenditures payable for the CQP and test center should be paid in the second quarter of 2023, as all plant equipment was delivered in time for the CQP opening in late March.
While the board has approved some additional expenditures for Giga Arctic, the timing of those expenditures depends heavily on the timing and scale of the Norwegian response to the US Inflation Reduction Act, we are not providing any guidance at this time. Assuming a reasonable response, this will allow us to reconsider the capital stack for the project. In the meantime, we're highly focused on the operational ramp at the CQP and the acceleration of the Giga America project. As previously mentioned, the U.S. Inflation Reduction Act Section 45X production tax credits begin declining in the year 2031 and will be completely phased out by the end of 2032, time is of the essence.
Partnering in the U.S. is key to our financing and development plans, with farm-down an interest in the project as a primary funding source for the first two production lines. As this project has always been positioned as a joint venture, we view project level equity raised in the farm-down process as non-dilutive and in fact should be a very positive value we drew to the parent company given where our stock is trading today. Using partner equity to fund the first two production lines will allow us to move much more quickly in getting batteries to market and allow us to take advantage of the lucrative merchant market versus traditional financing routes, which require long project financing processes and potentially discounted long-term offtake agreements.
We have also already begun early discussions with the U.S. Department of Energy Loan Programs Office regarding financing of phase IB of Giga America, which is the eight additional production lines in the future upgrade of the first two lines. We have begun discussing the same with the project finance banking community. Terms, timing, and cost will of course, ultimately drive our decision as to which option we choose with our partners for the debt component of this phase of the project. To be very clear, we expect the farm-down process alone to raise sufficient capital to get the first twI lines of battery production in the U.S. up and running.
As a reminder, we received an excellent package of incentives from the state of Georgia and Coweta County, totaling around $410 million tied to capital investment and employment targets for Giga America. While most of these incentives are tax abatements, there are grant components. As expected during the first quarter of 2023, we received a $20 million grant from Coweta County. This grant was booked directly to the balance sheet with an offsetting long-term obligation to reflect the requirement for us to hire a certain number of people for the project over time to keep the grant. While we receive the cash in the bank, you will not see it flowing through the income statement or cash flow statement at this time.
We have also obtained approval to receive $70 million from the state under a similar construct and are just awaiting disbursement. More globally, we are pursuing additional grants under programs in the EU, Norway, and in the U.S., and we'll keep investors posted on any developments in future quarters. We will continue spending on Giga Arctic in Mo i Rana, as we have been at a measured pace as we anticipate a response to the IRA from Norway now that the EU has approved a basic framework.
While we have already received indications of interest to provide project financing support from EKN in the form of potential debt guarantees, and the European Investment Bank and the Nordic Investment Bank in the form of direct project loans, the Norwegian response to the IRA is critical to ensuring Giga Arctic's global competitiveness. We are highly encouraged by the now very specific support programs announced last week by Spain, Germany, and France for projects in their countries. We expect more EU and EEA countries to follow suit. The potential favorable impact on the economics of all our projects around the incentive programs in the U.S. and the potential response in Norway is significant. While we have a long list of stakeholders at FREYR, allocating capital to the highest return projects is central to our financial policy.
Despite these long-term activities, our primary focus in the near term is getting the Customer Qualification Plant producing testable batteries as soon as possible. This is key to validating the 24M SemiSolid platform at giga scale and an important de-risking event from a customer and financing perspective. We continue to field and evaluate capital formation opportunities and interest from a wide range of existing and potential commercial, strategic, and industrial partners, as well as financial institutions. This interest appears to be driven by the widespread belief in the robust fundamentals behind the long-term expected growth of battery demand for both energy storage systems and the EV markets, and the incredible progress FREYR has made to date since its New York Stock Exchange listing less than 2 years ago.
We are striving for partners who believe in FREYR's mission and can grow along with us as we evaluate and take on projects like Giga Arctic, Giga America, the potential for upstream integration, our entrance into the mobility market, and other opportunities. Our U.S. initiatives, the Inflation Reduction Act, and the CQP opening in March, have acted as catalysts for such discussions, as evidenced by the excellent response so far to our farm-down process in the U.S. I should also say again that the 45X provisions in the IRA that relate to battery cell and module Production Tax Credits are very significant and very simple, unlike some of the perceived complexities around the EV-related incentives that required Treasury Department clarifications.
Produce a battery or module in the U.S. using raw materials from anywhere in the world, and sell the finished product anywhere in the world, and you earn Production Tax Credits. It's quite straightforward. The other simple math is that for every gigawatt hour of annual production in the United States, the company would generate $35 million of tax credit for battery cells and $10 million of tax credits for modules. The five-year direct pay option turns tax credits into cash, regardless of how the tax credit monetization market develops over time. These numbers get quite large when one considers a factory with 38 GWh of nameplate production capacity.
We are grateful for the ongoing support of all our financial and industrial partners, and especially our shareholders, as our progress on all fronts, as well as the continuous improvement in the demand outlook for our products and the urgency of addressing climate change, localized energy security and energy costs being demonstrated by businesses and developments and governments around the world. With that, I turn it back over to Tom for additional comments.
Thank you, Oscar, Jeremy, and Jan Arve. My job is becoming increasingly easier with such a dedicated, professional, and capable team. Thank you to you all and all the FREYR employees for all the hard work you put in every day. As you have heard, we're moving forward at full speed towards large-scale battery production based on the urgent need for sustainable development. Speed, scale and sustainability was, is, and will continue to be the strategic pillars of the company as we accelerate towards clean battery solutions. We have the people, we have the assets, we have the technology, we have the market, and we have momentum. As always, we will focus on what we can improve, keep an opportunistic approach to value creation, augment our industrialization partner of choice approach, and constantly add partners, customers, investors, and professionals.
Let me now move to the final slide before Q&A and also for my sincere gratitude and appreciation to all of our investors and shareholders. As stated, we are hosting today's inaugural Capital Markets Day on June 27th at the New York Stock Exchange, chapter two in FREYR's development. We are excited about inviting our investor and shareholders to this event 2 years after that special moment when I pressed the green button on the balcony. We will provide live stream from the Customer Qualification Plant and showcase live battery manufacturing of the SemiSolid production platform and show updates from the Giga Arctic construction. We aim to set a new benchmark in how a battery company should communicate milestones and technology progress as the nascent battery industry will benefit from increased understanding and insight across the entire ecosystem.
We will therefore deep dive into technical milestone and catalysts, provide in-depth reports on our increasing and accelerating strategic, commercial, and financing efforts, and maybe, just maybe, provide a surprise or two. Finally, I would like to thank our investors for your support and your patience. We will revert with invitations and further details, but stay tuned. We are coming to a theater near you. My final advice to you all is, as always, to stay long, or should I rather say, go longer. Life is not boring and definitely not intended to be short. With this, let me hand back over to Jeff or the operator to guide us through the Q&A. Thank you for your attention. Jeff?
Thanks, Tom. Operator, we're ready to open up the line for questions.
Thank you. Ladies and gentlemen, if you'd like to ask a question, please press star followed by one on your telephone keypad. That's star followed by one on your telephone keypad. To withdraw your question, press star followed by two, and please do also remember to unmute your microphone when it's your turn to speak. Our first question comes from Gabriel Daoud from TD Cowen. Gabe, your line is now open. Please go ahead.
Thank you. Hey, everyone. Thanks for all the great detail, prepared remarks.
Hey, Gabe
If I could just get a clarification or maybe, just a little bit more color on when we could expect fully automated cell production from CQP. I guess, is it 3Q at this point?
Well, good morning, Gabe, and thank you for that question. As we are stating in our prepared remarks, we are getting ready to produce the first active electrodes, both cathodes and anodes, we will gradually produce more and more of them. As you know, when we're scaling a battery facility with a first in kind technology, even though it's already a triple digit megawatt power scale in production in Japan, we are increasing the automation speed and increasing the size of the facility to gigawatt power scale. We want to sort of take baby steps forward to ensure that we get everything right. We will start off by producing active electrodes within a matter of weeks, we will gradually increase that and we'll improve the machinery.
During the course of the year, we will definitely be speeding up production, speeding up battery cell manufacturing, and getting into the catalyst and milestones that we require to satisfy the conditions precedent in the offtake agreements that we have. Exactly when we will have fully automated production at what speed and what yield and what uptime is something that we will provide more color around in our Capital Markets Day updates, but it's definitely going to be a gradual approach. The good news is we are getting ready to produce the first active electrodes with this new, larger, thicker electrode and battery that we are producing in the Customer Qualification Plant. As we evolve moving forward, we will provide additional updates as to when you can expect increased speed, increased yields, increased uptime, and reduced scrap rates, et cetera.
This is something that we will get back to in more detail during the Capital Markets Day on the 27th of June.
Thanks, Tom. That's super helpful. Looking forward to those details. Okay, maybe just shifting to Giga America, mentioned the two new phases here, just splitting out between phase I A and phase IB. For 1A, the first two lines, should we just think about it as maybe $125 million or so for those two lines? Just given prior comments on CapEx requirements per gigawatt hour of output. $125 million for those two lines. How much should we expect Freyr to sell down in terms of ownership of those two lines?
Jeremy, you can weigh in here, but just sort of a general comment. As we are alluding to. We are now announcing a 10 production line total facility. It will be built in two phases, obviously there will be certain upfront investment costs and infrastructure costs and building costs, et cetera, where we'll host the first 2 initial lines. We will upgrade those gradually. We will add additional 8 lines on top of that, of course, build more upstream and downstream equipment as we go along. We are not guiding specific CapEx at this point. We will be providing more color and detail around that as we are approaching the FID.
Maybe Jeremy, you can talk a little bit more about, you know, the quantum of capital that we're targeting to raise and provide some more nuance to this to our investors.
Sure. Happy to do that, Tom. Gabe, to your question, you know, this financing process that we have undergone and kicked off about, I guess, it was almost a month ago now, we're hoping to raise north of $800 million, but that is obviously not just CapEx related. It includes a burn rate over the next several years for the Giga America facility. It also includes some of the pre-spend infrastructure for the second plant, as we talked about. Working capital requirements for the project, not to mention, I mean, we're building a big team. You know, we have 20 U.S. employees today, and we'll be building to, you know, 300 employees over the next couple years. Costs associated with that.
as Tom said, we'll be providing guidance on the CapEx later. included in that raise will be again, all at the project level. we're excited about the engagement we've had so far, both with strategic partners and some financial sponsors as well.
Gabe, if I...
Thanks, Jeremy. That's helpful.
Just to give you some context, Gabe. The Customer Qualification Plant is a single line facility with limited upstream and downstream, and it's a brownfield because it's not meant to run 24/7. That kind of budget you just referenced is more in line with the CQP. Again, this is a 2-line full capacity, full upstream and downstream, meant to run 24/7 commercial, you know, kind of operations. It'll be bigger than that, obviously.
Yep. Got it. Got it. Okay. All that makes perfect sense. Just the last one for me, and then I could throw self line. The slide nine talked about the NPV coming from IRA tax credits. Could you maybe just give us a little bit more color around that in the expectations or what the assumptions are in terms of we're keeping the entire credit, or you're sharing that amongst some other parties? Just any more help there on that $2.5 billion of NPV from IRA would be helpful. Thanks, guys.
Yeah. Maybe I can just give some color on it. We've modeled, of course, our perception of the market moving forward. We fundamentally believe in a structural market short environment, and particularly in the energy storage space. We are thinking merchant pricing, at least for the initial phase of the project, since we're gonna have project level equity financing going into it. We are assuming a set of CapEx numbers that we are now validating and updating and benchmarking to global benchmarks. We're also seeing some deflationary pressure happening in the markets, and we're trying to capture that as we're sort of building out larger facilities. As you can imagine, we will be parallel developing, as we mentioned, both Giga Arctic and Giga America.
That gives us also purchasing power in terms of how we are sourcing our production line equipment and moving forward generally in that. We will of course, when we enter into project finance for the subsequent phase IB, and the larger eight line facility, part of that will be DOE loan supported as well as project finance supported. We have reflected the lower, let's say, pricing that we probably have to accept when we enter into longer offtake agreements to support the project finance of that phase of the project. When it comes to the division of the Production Tax Credits, it's a little bit too early to tell how that will sort of play itself out.
What we are observing in the market is that our customers, which is important to note, now have quite deep incentives to develop standalone battery storage projects, which by the way, the queue of which is at record high, both standalone battery storage projects as well as solar plus storage projects, and that is pre IRA. The incentives to establish these facilities in the U.S. are actually quite significant. We have inbound requests from potential customers to actually share those investment tax credits with us so that they can secure battery supply developed in the U.S. I think the jury is out in terms of how much is kind of divided and how that Production Tax Credit ultimately filters through to the market.
It's clearly a function of demand and supply at the end of the day, but we do see demand really, really high. Then I guess the key question is who's able to produce supply in a timely manner? We have a head start in the sense that we are starting up our Customer Qualification Plant, which again, is an industrial scale production line, and largely or sort of generally put, you could say that both Giga Arctic and Giga America are multiple replicas of that. With the blueprint that we have established for Giga Arctic, we are sort of having a flying start, if you like, into the development of Giga America. We really are looking quite favorably upon the future.
As we mentioned-We see the net present value of this project on a full 10-line capacity basis at $8 billion, of which $2.5 billion is the gross, let's say net present value from the Production Tax Credits. Then we'll see how that all sort of manifests itself over time. Maybe Jeremy, you want to add something to this. So this is kind of generally a little bit how we're thinking about it.
The only just nuance I would add is that the $2.5 billion of the $8 billion, we are assuming full realization of both the cell production credit and the module production credit in that number. That's what's in the model today. That's my only clarification.
Got it.
Thanks.
Got it. Got it. Okay, great. Thanks, guys. Appreciate it.
Thanks, Gabe.
Our next question comes from Gregory Lewis from BTIG. Gregory, your line is now open. Please go ahead.
Yes, thank you, and good morning. Good afternoon, everybody. Tom, you know, thank you for the slide on outlining the strategy for Giga America . I was hoping for a little bit more clarity around phase IA in terms of the size. It seems like the nameplate capacity for that line is a little bit, you know, smaller than it seems like it's gonna be in the back as we kinda move forward. Any kind of color around that? Was that kind of a function of speed to market, available, the supply chain supporting that, funding? Any kind of color you can give around that, just given that it seems phase IA is a little bit smaller than what the average line's gonna be going forward.
Thanks, Greg. Just a quick response to this. Bear in mind that the 24M technology as any, well, not any, but most battery technologies are sort of generations of the production technology. Those Generation have a tendency to increase in speed of production over time. Of course, there are intrinsic limitations to conventional technology in terms of how much active material you can push through the system. We are starting off with what we label Generation Two, and that is what we have at de facto built at the Customer Qualification Plant. That has a certain speed of production when it's operating at nameplate capacity. We are implementing, as we are also describing in the materials, to Generation Three, which is a significant increase in speed of production.
That of course increases the throughput speed of an installed capital expenditure unit. The first two production lines after upgrade is more like 8 GWh of capacity when it sort of turns into Generation Three. That's a little bit more color around that. As mentioned on the CapEx side, principally, we will of course raise at the project level, the equity required to build the initial 2 production lines of Generation Two. We will also upgrade those production lines at a later stage, which is also embedded in what we're raising capital for. Then we will gradually replace the Generation Two lines with Generation Three lines.
Bear also in mind for your benefit that we are producing LFP batteries, large pouch-based cells, which we will ultimately embed into modules for, largely speaking, the energy storage markets, but also increasingly for e-mobility applications. As we announced in January this year, our first sort of conditional offtake agreement in that regard. That's a little bit how you should think about this. If you average out what we have stated before relative to number of production lines, I agree that 2.5 GWh seem low, but that is because it's only in brackets Generation Two, which will be upgraded to Generation Three. It's LFP versus NMC, which, of course, is the same as we've said before, but that also has a certain impact on the energy density that flows through the system.
Hopefully that provides you additional color. Jeremy, feel free.
No, that was super helpful.
Yeah. Yeah.
No, that was super helpful. Thank you very much.
No different comments. Go ahead. Yeah.
Our next question comes from Philipp Koenig from Goldman Sachs. Philipp, your line is now open. Please go ahead.
Yeah. Hey, guys, and thanks for the presentation. I guess my first question is on the progress of the CQP. Sort of when do you envisage that you can, you know, post, you know, finishing the electrodes, when can you send those sample cells to your customers and, you know, reach the validation level that will sort of unlock the final investment decision for Giga Arctic? Sort of how many months out are we from that point in time, and what is sort of the visibility that you have on that process? My second question is on the U.S. part on that phase IA.
I guess how dependent is that facility and, you know, that financing from on a, on a project level coming in, how dependent is that on pro-process progress on the CQP as well? Is that sort of interlinked in the same way and we can sort of think about a similar timeline? My last question is just on the CMD. Will that be very much focused on the technology? Will it be more focused on Giga America? Sort of any more color on the event would be much appreciated. Thank you, guys.
Thanks, Philip. I mean, I was trying to answer that question in a previous question, I guess, in terms of moving from commissioning the Customer Qualification Plant to electrode production to high speed throughput, let's call it qualified batteries that unlocks conditional off take agreements and therefore financing. We are moving into that production phase now, and as mentioned, we are weeks away from producing our first active electrodes, meaning that we can charge and discharge batteries essentially from products that we are producing at the T2B. We will in a careful manner, increase the number of electrode pairs that we're producing, putting them into an increasing number of batteries and increasing the speed at which we're producing the mats.
During that time, we will encounter issues and challenges, that we have foreseen. As we've mentioned before, we have identified more than 1,600 potential Standard Operating Procedures to sort of rectify potential errors in production as we move along. We're well prepared for the issues that come. But it's a little bit hard to sort of be very specific on when exactly we will have a sufficient amount of testable batteries that will unlock the off take agreements. We're definitely in, you know, the coming weeks and months going to increase that speed quite dramatically. Speed in terms of producing testable batteries. We're also, of course, integrating our customers deeply into the testing regimes that we're doing on site. We're obviously also going to do third-party testing of the same batteries.
You should expect that our timelines for unlocking additional financing is in, you know, the coming weeks and months, is really where we are. When it comes to your second question, how does this sort of filter through to the project level financing of Giga America? Clearly, our customers there and our investors and strategic partners will want to sort of have clarity and comfort around our ability to produce batteries at relevant, let's say, with relevant technical milestones and metrics. At the same time, they're also deeply embedded in the strategic intent of unlocking the energy transition. It will be a phased approach with these stakeholders for sure. There will of course, be a link to our ability to produce batteries.
We're talking about unlocking these things in a very significant manner in the not so distant future. As I said, on the Capital Markets Day, to your third question, we will be providing additional color, not only on the technology. As we mentioned in our prepared remarks, we aim to be very transparent about our technical milestones. We aim to provide you with what we are looking for when we're scaling technology. We're scaling the 24M technology. We aim to provide you with details around yield metrics, speed metrics, uptime metrics, scrap rate metrics, et cetera, as we find appropriate as we move forward. That will be one part of the Capital Markets Day presentation. We will also provide deep dives into our strategic, commercial and financial partnership discussions. There are quite many of them.
Not only the Energy Transition Acceleration Coalition partnerships, which we announced at the opening of the Customer Qualification Plant, but there are multiple additional partnerships in the making as well. You should expect a broad envelope of topics, but a relevant level of detail that will answer more, maybe not all of the questions that are posed on this call, but definitely much more color, to provide more guidance as to how we're moving forward.
Thank you, Tom. Best of luck.
Thanks, Phil.
As a reminder, to ask any questions, please press star followed by one on your telephone keypad. That's star followed by one on your telephone keypad. Our next question comes from Julien Dumoulin-Smith from Bank of America. Julien, your line is now open. Please go ahead.
Hey, guys, it's Alex Vrabel on for Julien. Thanks for taking the question. Just to follow on, I think to one of the earlier questions that was raised on the NPV math you guys have done here. When we think about the distribution of the $2.5 billion of tax credits, I mean, how much of that is reflecting in phase IA versus phase IB? Presumably, you know, phase IA has a bit of an outsized advantage given it's running ahead. I'm just curious if you can speak to sort of, you know, timing and how quickly that NPV would move around depending on your FID timing.
Thank you for that question. Jeremy, do you want to chime in on this one?
Yeah, sure. We have looked at in the model a breakdown of the credits coming in that make up that $2.5. We see it's roughly... I mean, keep in mind, it's not only just timing, but it's also capacity. While, yes, phase IA does have an advantage from a timing standpoint, it's likely only to be about 1 year versus the capacity delta for phase IB. We actually see it about, trying to do math in public here. I think it's like 70% of that, maybe 65%-70% of that $2.5 is in the phase IB project, with the remainder coming in the phase IA project.
Again, when you look at 38 GWh of capacity, and you have 8 of it coming in 1A after the upgrade, and of course, that upgrade happens a little bit later in timing. You have those, the smaller capacity early, which again, the whole point of this acceleration plan is to go get those Credits and the margin associated with the business in phase IA, and being able to do that earlier than what we had originally planned. It's all sort of a net add to the total project, but the breakdown is about 65%-70% in 1B of the Credits and the rest coming in 1A.
Got it. That's super helpful color. Maybe shifting back to Giga Arctic. You know, you guys made a series of mentions around sort of your capital spending cadence. I think, Tom, you mentioned you expect something as early as summer. Not to hold your feet to the fire, but, you know, we're pretty close to summer. What exactly are you waiting for, if we can just sort of, you know, throw the broad-based question? How do you think about, you know, whatever that is translating to how you're willing to allocate capital, given all the sort of multivariate things you guys have going on?
I guess you're referring to the IRA response from the Norwegian government linked up to the EU's response under the Temporary Crisis and Transition Framework. As we have alluded to in the presentation material, of course, the European Union did come out with their, let's say, high level responses to the Inflation Reduction Act earlier this year. That is now starting to manifest itself into specific support packages for gigafactories being developed in countries like Germany, France, and Spain. All of these were announced last week, towards the end of last week. Still a little bit unclear as to the detailed specifics of it, but we're talking about support packages for gigafactories in the $ billions.
The Norwegian government, which of course we have a very strong and close relationship with, have since they launched their national battery strategy at the Giga Arctic site less than one year ago, have clearly stated that the Norwegian support packages will align very closely with those of the European Union. If anything, the support packages that we're now seeing is a reference to what you should be expecting from the Norwegian government. We of course, have been quite specific in our dialogue with them as to what we believe are competitive support packages to unlock the scaling of gigafactories of the kind that we're building. We have been provided with formal feedback that such clarity will be provided to us before the summer.
Before the summer in this context is probably by the end of the second quarter. The, before the summer is what we have technically been communicated. These are weeks away from having more clarity on this. When it comes to the second part of your question, as we've also been quite clear on in Oskar's remarks in particular, we are prudent when it comes to releasing and spending capital. Even though we have a strong balance sheet, we clearly need to raise additional capital for the project that we are seeking to build, specifically Giga Arctic and Giga America. We've spoken at length at Giga America on the project level equity raise there. For Giga Arctic, we are with government support moving towards unlocking the project finance later this year.
Depending on what support package comes through, we will then evaluate what that is, and then we will be back to the market with our specifics in terms of how we push that project forward. In the meantime, we are continuing to develop it at so-called measured pace. As you will see, and you see from the materials, the plant is developing and it's becoming a large facility and we're obviously going to continue to move forward on it, but in close lockstep with the development of the incentive package coming from the government.
Got it. That's really helpful color. I'll take the rest offline. Thanks.
Thanks, Alex.
We currently have no further questions, so I would like to hand the call back to Jeff Spittel for final remarks. Please go ahead.
Thanks, Bruno. Thank you everybody for your time and attention and the thoughtful questions. We'll be available for follow-ups the rest of the day and the week, and, we will see you on the road very soon. Of course, we're looking forward greatly to hosting everybody at the New York Stock Exchange on the 27th. We'll speak to you soon. Thanks.