Q3 2023 FREYR Battery SA Earnings Call

Participants

Birger K. Steen; CEO & Director; FREYR Battery

Jeffrey David Spittel; VP of IR; FREYR Battery

Jeremy T. Bezdek; Executive VP of Global Corporate Development & President of FREYR Battery U.S.; FREYR Battery

Oscar K. Brown; Group CFO; FREYR Battery

Adam Michael Jonas; MD; Morgan Stanley, Research Division

Alex Rabell

Gabriel J. Daoud; MD & Senior Analyst; TD Cowen, Research Division

José Maria Asumendi; Head of the European Automotive Team; JPMorgan Chase & Co, Research Division

Tyler DeMatteo

Presentation

Operator

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 FREYR 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.
(Operator's Instructions)
I would now like to turn the call over to Jeff Spittel, VP of Investor Relations. Please go ahead.

Jeffrey David Spittel

Hello, and welcome to FREYR Battery Third Quarter 2023 Earnings Conference Call. With me today on the call are Birger Steen, our Chief Executive Officer Brown, our Chief Financial Officer; Jan Haugan, our Chief Operating Officer; Jeremy Bezdek, Executive VP of Corporate Development and President FREYR Battery U.S. 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 S1an 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 Birger.

Birger K. Steen

Thanks, Jeff, and hello, everyone, who is joining today's call. We'll start today with an overview of what we believe is FREYR's compelling equity story. The value proposition is based on the premise that electrification is both inevitable and reliable mass deployment and batteries. But in today's higher for longer cost of capital environment, the companies who will emerge as the next leaders of the energy transition in multiboorations with rigorous financial discipline. Our team at FREYR is unified in that vision of the business and we're committed to develop on a unique competitive position with that approach. With that in mind, we're excited about the opportunities we have to establish FREYR as a leading developer and scale of battery technologies across the energy storage and electric mobility sectors. Hecla third and earlier this year, the long-term growth potential in our core markets is profound and aligned with decarbonization initiatives, Western Energy Security that comminative public policy, highlighted by the inflation Reduction Act in the U.S. As stewards of your process capital, our responsibility is to maintain the liquidity we need to convert these opportunities, which are punctured by a growing universe of brief 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, diversified on the technology spectrum and dine value chain, maximizing the IRA incentives and finally, developing our highest concern projects. Turning to Slide 4. 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 reduction at the CQP. And we have implemented a detailed plan to address the complex challenge of scaling the 24 semi-solid platform. In light of the current CQP calendar, the U.S. Kaman's resculpt Giga America to pursue a full-scale project from 2 parallel paths. PAC1 is based on the 24/7Solidtechnology and PAC2 to leverage conventional technology. As Jeremy will document shortly, these 2 paths are not met 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 Artic project. We have elected to minimize spending in 2024, while our work in ties up to CQP, involving engaged with innovation and European government stakeholders to established framework conditions that place the project follow globally competitive economic terms. Moving to Slide 5. 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 2-plus years. Oster will inoperatein a chart. While we say that our balance sheet, we won't be able to move as quickly as we like in the retro, but I want the following point to make clear. FREYR is not going into hibernation need. We'll continue our important work at the CQP, where 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 offer new opportunities.

We will continue to fund critical initiatives that we believe will generate value for our shareholders, and we will advance we're keeping our earnings while we maintain the strategic flexibility that necessary to drive in today's high locality dynamic. Slide 6. Irish later is on the CQP. The timeline to achieve automated production of inspect cells has pushed beyond our previous goal of the fourth quarter 2023. The envisioning of the casting and unit cell assembly equipment, which is 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 to post engineering challenges as well to these challenges has been implemented the plan to prevent further delays. We have implemented changes in project governance. A heightened in coordination with our vendors and ecosystem partners, and we are elevating the involvement of our battery subject matter experts and know that relevant partners inside and outside FREYR.

This initiative is spared by the formation of the Technology Advisory Board comprised of some of the industry's for most minds, including Dr. Dan Steingart, FREYR Board member and Call Director of the Columbia University of Lectrochemical Energy Center. Dr. Steingart and his fellow Advisory Board members by drawing on their collective wealth of commercial and operating experience to assist our team at the CQP. Let's look to Slide 7 for a brief overview of our technology strategy. Our strategy has always been to establish FREYR's business across the technology spectrum and into value-accretive adjacencies what's in the mavachain, and we aren't working on that front. -- in conventional technology partnerships to complement 24M semiSolid, to unlock avenues to financing and commercial development and potentially accelerate project development timelines. Conversations we're having are exciting and our testament to the unique position we're establishing in the marketplace as an industrial partner of choice.

The pursue technology diversification is intended to be complementary and anti to 24M semiSolid, and now it diminishes our excitement about 24M's potential as a fit-for-purpose solution across a variety of growing use cases. Although scaling the 24 platform at the CQP is proving more challenging than we anticipated, we believe we have the financial organizational resources to do it, and we believe that it's a worthwhile investment of our trial. I'll now turn to Slide 8 aon Giga Arctic. We announced this morning that we're minimizing spending on Giga Arctic in 2024 because we need to prioritize liquidity during the CQP scale and focus on capturing IRA incentives in the United States. We value our partners and supporters in Mo i Rana, where the setons our first operating assets and the technological heart of the company. The higher for longer interstate environment than the introduction of the IRA have changed the business case for Giga Arctic. We must operate with in 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 with Giga Arctic in 2024, we'll continue to work with stakeholders in a region and European governments to involve the framework conditions that are competitive with the IRA we found those variable cost offsets under capital spending initiatives in countries in the rest of the world, all of which are required on to China's structural cost advantages and dominant market share across the battery supply chain. We look forward to engaging locally to promote the purchase and establishing decarbonized battery production here in Norway. In Igarin, we will spend the previously committed CapEx that Dirk to secure the asset to serve the option value of the project. And with that, I'll turn the call over to Jerry.

Jeremy T. Bezdek

Thank you, Birger. Please take a look at Slide 9 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 Birger mentioned have impacted our ability to close the Phase Ia 2-line Fast Track project financing within the previously discussed time lines. 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 2-line project. We see significant value in adjusting our focus to the larger project, Phase Ib, 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 24 M-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 Birger mentioned. We are currently in multiple conversations with potential conventional technology partners around advancing the 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 start of 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 the 24 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 Oscar to provide a general finance update as well as an update on the redomiciliation in first. Oscar?

Oscar K. Brown

Thank you, Jeremy. On Slide 10, we provide an update regarding our announcement to redomicile 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%. Redomiciling 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 FREYR with a country that has offered the highest sense 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 15 for shareholders of record as of October 25.

The transaction requires 50% of our outstanding shares to vote in order to ensure a forum and 2/3 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 FREYR 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 $0.07 per share when compared with a net loss of $94 million for the same period last year. Net income from last year's period was impacted by a $70 million noncash loss on our warrant liability fair value adjustment due to changes in our stock price. This line item reflects a gain in our stock price declines during any reporting period and a loss on our stock price increases. For the third quarter of this year, we recognized a $24 million noncash gain on this item. For the 9 months ended September 30, 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 and administrative expenses as well as higher research and development costs for the third quarter and the 9 months ended September 30 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 2 years and into 2026 and focus on those 2 projects, all before we raise additional capital. We expect a material reduction in G&A and capital commitments in 2024 compared to 2023. Regarding our cash investment rate and liquidity, we spent net cash of $235 million during the first 9 months of 2023, which included $169 million on capital expenditures. During the third quarter, FREYR 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 Giga Arctic 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 runway for the company. Our near-term priorities again remain ramping up to CQP, securing the initial buildings at Giga Arctic as we continue to seek a globally competitive incentives package with scaling battery manufacturing from the government of Norway as well as progressing Giga America. We'll provide additional guidance on capital expenditures only upon the success of the Giga America 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 incentive programs and will do so throughout next year, we are not currently forecasting any capital expenditures for Giga Arctic 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 on G&A, R&D and Giga America costs rent. 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 FREYR has a cash runway of more than 2 years. As a result, our total cash uses in 2024, meaning 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, tacking 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 of less than half of that in 2023 that the priorities 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 nondilutive 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. While Jeremy described project-level equity for Giga America is available and is clearly tied to getting the CQP up and running as design, reducing testable batteries and receiving those 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 invitations part 2 of the process from the DOE. After receiving that invitation, we will file Part 2 of the application 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 EUR 100 million grant for Giga Arctic by the European Innovation Fund, the EUIF have 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 time line to continue the project with globally competitive scaling incentive programs is available. While we also have been grateful for the support and indications of interest expressed by all our export credit agencies, including Acan the Nordic Investment Bank, the European Investment Bank and the EU Innovation Fund, it is important to note that FREYR has not received any cash from these entities so far and all progress on Giga Arctic a 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 superior 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 our 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 Birger for additional comments.

Birger K. Steen

Thanks, Oscar. Before we take your questions, let's close with a look at FREYR path forward on Slide 13. In today's high discount rate environment, ASH is king. We have a clean balance sheet with no debt, and we're reducing our cost to extend our liquidity runway to 2-plus years and beyond. We will not authorize any significant new CapEx in 2024 until new financing is committed. We are pursuing conventional technology partnerships, advancing the redomicile into the U.S., resting through the commissioning and 24M scale-up processes at the CP team. We will communicate news on all 3 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 and catalyzing FREYR's next wave of capital formation.

Norway and Europe, we're working with key stakeholders to establish a globally competitive incentive program, while we preserve Giga Arctic option value. And finally, we're executing our strategic plan with car priorities. And as we have learned over the last 2.5 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.

Jeffrey David Spittel

Thanks Birger. Operator, ready to open up the line for Q&A.

Question and Answer Session

Operator

[Operator's Instructions)
And your first question comes from the line of Adam Jonas with Morgan Stanley.

Adam Michael Jonas

I 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, Burger, how much of FREYR's success is tied to 24M. If this turns out to be a dud. And I'm curious at what -- when will you -- 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 tight the entire story is to 24M specifically. So if you could realize it's a qualitative question, but I would appreciate your impressions, please?

Birger K. Steen

We think of 2 tracks who I've indicated or it's getting started in Giga America is one track where we have some technology risk. We'll talk more about in a second. You have as geopolitical advantage and variable risk, then pursue another back, which will be licensed and conventional technology with essentially the opposite characteristic solved geopolitical risk with very little technology risk. So 2 informated parts, if you will. And then inside of the 24 impact, I think it's fair to say that as we progress towards the last commission packages that we're delivering in the CQP and getting ready for production. We're also getting into some of the harder stuff. And it is also fair to say that we are discovering aspects of our chosen solution that might have had the technology readiness level that we would have anticipated in making a choice and until now. In fact, that's just as a part of getting to the stage we're at now, very difficult to foresee upfront. 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 pass through to that. But we're making key changes to make sure that we debottleneck and unlock that path.

We continue to have, and I think we've spoken about before, the delivery of cells in an automated way out the CQP company priority #1. And along with selective members of my leadership team start every day 9 a.m. with a daily follow-up call to return will remove all blocks from the path in front of that. We have all FREYR boreal now engaged at the CQP. We might have been more diverse in terms of our priorities previously. We have key vendors like mPAC inform others outside mPAC is running double shifts, we have toehold for getting for help on site and when we discovered that we need it. We're aligning with other semisolid licensees. We have people on site several of them and making sure we learn the most from the maximum from the other people who have gone before us, and that is share experience to those to our trial, they got at the same rate of speeds we do.

And we've also involved both the customers and vendors directly into our daily standup follow-up meeting here. So through all of this, we've created a lot more transparency. We've got a better view 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 motor. And that's what extent as you recall, the extension of the time line here. If we had a conclusion here that said, this is not going to be viable. We would of course have shared it. It's a tapeout of our Technology Advisory Board and so 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 CQP diggenerations of the Sansot.

Adam Michael Jonas

Thanks, Birger. And just a follow-up on the runway discussion. I was going to ask whether the 2-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 the 2 years... Oscar I want to know whether that 2-year plus bakes in a minimum cash level to run the business for payroll expenses, et cetera, or whether that was a mathematical down to near 0 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, Oscars,is the 2-year-plus runway a really conservative base case, something you really have a line of sight to and that's achievable? And is that base case? Or is it kind of more of a stretch goal?

Oscar K. Brown

No, great questions, Adam. Thank you. So there's a couple of things. So just reconfirming, yes, the runway 250 starts at the end of 2023 and our runway extends into 2026. Amount of cash you needed to hold on the balance sheet to sort of run the business like the working capital is very low, so that's not significant. Just responding to 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 a big Arctic that we're causing now until we get any kind of new financing related to that. So that's a significant piece of the puzzle. But clearly, that's a more focused level of activity with CQP and then Giga America Development and the ones that Birger 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 and we're very confident in that.

Birger K. Steen

I think we're not providing numbers on headcount today, Adam, but the priorities that the company was pursuing up until quite a recent day we're more than moving on now laser focused now on delivering selves in estate runway and keeping optionality around our. And that's going to allow us to take down to quite dramatically without impacting our key properties. So that's what we're doing. We've had Ulhas meetings across the company today. There's a unfamiliar territory from somebody that there's a fairly -- a very straightforward process, all trudoduction in force processes in Roever, most of tough to are well advanced and executing on those in importance with open relation we no barriers in the court. So this is, as Oscar said, not aspirational issue that's in the process.

Adam Michael Jonas

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, would that be -- is that something that would take a couple of quarters to settle on given some -- perhaps some adjustments to get there, including some onetime payments? Or I don't know if you had an idea of when that $30 million 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.

Oscar K. Brown

And so reemphasizing the burring will be below $30 million a quarter, and it will be as of January. We will take a small kind of single-digit onetime charge related to severance. But the -- you'll see this out of the box in Q1. To be very clear January 1, Q1.

Operator

Your next question comes from the line of Tyler DeMatteo with BTIG.

Tyler DeMatteo

I wanted to follow up on some of the comments in the prepared remarks related to the CQP and the plans to prevent further delays that you highlighted some comments on partners and vendors. I'm just curious, how are you thinking about maybe leveraging more of your partners and vendors to ensure 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?

Birger K. Steen

Yes, it may be pretty 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 3 sides engaged in problem-solving where we identify a robot and to remove barriers for the team on the ground. And I think 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 debottlenecking progress towards first sales.

Tyler DeMatteo

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? Or and if so, how?

Birger K. Steen

So I think the semiSolid technology was always a very promising technology as it relates to producing signalectrodes and thereby achieving the totemic properties you want for particular vacations like ESS. So if anything, our conviction that this is going to be a very good market for the technology we're advancing to strengthen. And we're just going to keep executing towords that.

Operator

Your next question comes from the line of Gabe Daoud with TD Cohen.

Gabriel J. Daoud

I was hoping we can maybe level set Giga America again. So going back to the original plans, could you just remind us what the capacity targets are for boat track? 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 Big America? I think the fast-track plan was 2.5 gigawatt hour capacity by the least starting production by the summer 25. So maybe just level side and give us a little bit of an update on the initiatives now like Big America.

Jeremy T. Bezdek

Yes. So it's 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 track1 as it relates to the 24M technology, because we are in the DOE process, the time line to sort of closing the financing, the equity will likely line up with the DOE process. And so that will kind of dictate when we could close financing, which then allows us to order the long lead equipment and then that will take the start of production. So as we think about the DOE process for the 24Mplant, 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, 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 Birger 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 going to allow us to likely beat that start of production timing I just mentioned for Track 1 with the Track 2 plans. And then really no way to really comment on capacity yet on track 2. That's still being negotiated, obviously, with the potential license partners. So more to come on that.

Gabriel J. Daoud

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 with LFPs 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 Nidec, I mean, could you pivot and contract 2 or Phase I, I guess, be the sole source of supply for Nidec? -- doesn't necessarily care if it's 24M technology. Is that correct?

Jeremy T. Bezdek

Yes. 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 Birger 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 Nidec, the one difference here for them as our module impact partner is the 24M cell design is different than a conventional cell design. So it will be 2 different module designs that go with that. So we're working very closely with them on both Track 1 and Track 2. And so the way we would envision the relationship moving forward is to 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.

Operator

Your next question comes from the line of Alex Rabell.

Alex Rabell

I'm curious with the -- you 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 1 or Track 2, my understanding is you do need to show some offtake to get through the DLA alone 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, 2 years ago?

Jeremy T. Bezdek

I'll take a stab at that and then if anybody wants to join in, feel free. Supply demand drives price, right? And so yes, it will 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 there are significant margin and there'll be periods where there are tighter margin. And that's why relying on the competitive advantage that we can build into both our scale and our technology partners is going to be helpful as we 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 Nidec, 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.

Birger K. Steen

Yes, I guess, just for clarity, -- we haven't heard any objections when it comes to the LTSAs and moving volumes between Giga Arctic and Giga America. And the other note I'll make is the notion of a Western technology base, ESS solution has a lot of enthusiasm what about in the market. We're getting very strong responses and trade shows and elsewhere on the concept. So coming with a technologically derisked solution and a geopolitically derisked solution seems like a really winning combination.

Alex Rabell

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, Birger, 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, I'm curious how you think about that sort of track to. What are you looking to see again, you just mentioned sort of the U.S. platform. And I think that there's sort of consequences or ramifications that go along with that. How are you thinking about that app specifically relative to some of the things you've already seen as far as the U.S. reshoring, but also not necessarily having these core technical capacities as others do in the rest of the world.

Birger K. Steen

That point or goes to the conclusion again, right? Because in an environment where you get a lot stronger loss stricter restrictions on the origin in the IT or your process or the ownership of the asset or the license or clearly, the 24M semi solar platform is going to be significantly advantaged. And conversely, an environment that sort of doesn't go further in that direction, the derisk through a bimaturity, international FT solution, it's going to be advantaged. So I think we can play to both sides of this argument. That said, we are, of course, paying very close attention to it. We're spending time in BC to understand what's -- what might be it be percolating and staying close to the people who are providing non-diluted funding for us to ensure that we have a good picture of the risks.

Alex Rabell

If I could just sneak a quick follow-up. Just on the effective, I guess, capital plan for Giga Arctic 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 right that we should be aware of there?

Birger K. Steen

We see the cost of keeping the Giga Arctic optionalize and possible to hotstart as it were somewhere between $3 million and $4 million a year. So not significant in our runway expective as we've discussed it.

Operator

Your next question comes from the line of use end José Asumendi.

José Maria Asumendi

I want to come back, please to Slide 6. 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 it on the slide further prevent further delays? Can you elaborate a little bit more on this dedicated technology advisory board.

Birger K. Steen

So our Technology Advisory Board is chaired by our Board member, Dr. Dan Steingart out of Columbia University. And just this last month, I 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 probably -- we will continue to strengthen our own in-house technomuscle. To ensure that we build our own ability to scale not only in this permutation of semi-solid but also in the next permentation. So that's what's going to bear out our confidence that the Senecio platform is the right bet for a Western Hemisphere based incentive IP for battery cell production. And then in terms of what we're doing every day, I guess, probably could invite you into our morning meetings and you'd see all the seller making, but I'm not sure how that would play, rest assured, this is taking up and the attention span of the key people in FREYR were all this on a daily, if not hourly basis.

Operator

[Operator's Instructions)
There is no further questions in the queue. So with that, I will turn the call back over to Jeff Spittel, VP of Investor Relations. Just go ahead.

Jeffrey David Spittel

Okay. 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.