Construction on Rochester Site Halted
Li-Cycle, a lithium-ion battery recycling enterprise based in Toronto, has made the decision to suspend work on one of its hub locations, a step which has inevitably caused share prices to drop, impacting overall expansion efforts.
In the summer of 2016, Li-Cycle was established, and just one year later the firm began building a “mini-pilot” plant with the capability to handle 50 metric tons of material on an annual basis.
The Rochester site in New York would be its second commercial-scale processing facility. However, in a recent announcement, Li-Cycle declared that they are currently examining the future of the Rochester, N.Y. site, “pending completion of a comprehensive review of the go-forward strategy for the project.”
This venture is partly supported with $375 million from the U.S. Department of Energy, and Li-Cycle confirmed that they “continue to work closely” with the federal government during this assessment.
Financial Results to be Released with Project Updates
The overall cost for Li-Cycle’s $175 million project has unexpectedly risen due to “escalating construction costs.” Most of the tasks related to the project, including procurement and engineering services, had already been completed. Originally scheduled to become operational in 2022, now the estimated commencement date is 2023.
“In light of these developments, the Board of Directors has decided to pause construction work on the Rochester Hub, pending a review of the project, including an evaluation of the go-forward phasing of its scope and budget, including construction strategy,” the press release stated.
On November 13th, third-quarter financial results will be revealed by Li-Cycle as well as details about the company’s near-term plans and the evaluation process for its projects.
Share Prices Significantly Drop
Following the news, shares of Li-Cycle dropped dramatically by 48 percent on Monday, or more than 80 percent from their 52-week high, leading law firm Kirby McInerney to launch an inquiry into potential infractions of federal securities laws and other improper business activities.
A warning from Morgen Stanley alludes to a possible, “period of dislocation for announced and in-progress highly capital-intensive projects that rely on large quantities of attractively priced external capital.” The analysis further added this was due to, “Higher interest rates, rising cost of capital, and a slowing EV market could expose a number of projects and business models that may struggle to bridge the gap to self-funding status.”
“Li-Cycle has chosen a high-stakes strategy where they have been aiming for what could be described as a monopoly in the market, using the combination of distributed preprocessing and their Rochester plant to build barriers to entry for other players,” the managing director of the international consulting firm Circular Energy Storage, Hans Eric Melin, commented.
“They have been extremely successful in attracting capital, which was unparalleled in the industry,” he added. “Whether this means that they have been flying too close to the sun is too early to tell, but escalating costs and a terrible performance for the share is obviously a bad combination.”
Li-Cycle’s shares were also affected adversely when Blue Orca Capital issued a report raising concerns around their practices in March of 2022. The Securities and Exchange Commission (SEC) chose not to announce an investigation into the matter.
But, despite the setbacks, the company reaffirms that it is still, “committed to continuing to support and serve its customers and strategic partners, to lead the global supply of recycled critical battery materials for a clean energy future.”
