BlueOval SK, a joint venture between SK On and Ford Motor Co., received approval from the US Department of Energy for a $9.63 billion loan Monday, securing funds to construct three battery manufacturing plants in the US.

The loan is part of the government’s Advanced Technology Vehicles Manufacturing program, which offers low-cost loans with an interest rate equivalent to the US 10-year Treasury bond, currently around 4 percent, according to sources. The program targets companies producing electric vehicles, battery cells and other high-tech vehicles and components. The loan matures on July 15, 2040, though this is subject to change.

“The funds will be used to complete construction of three manufacturing plants – two in Kentucky and one in Tennessee – by next year,” said an SK On official. “We will continue to work closely with our partners to support seamless operations of BlueOval SK.” The annual production capacity of the facilities is projected at 20 gigawatt-hours, enough to power around 1.2 million EVs. SK On batteries will be installed in Ford’s E-Transit Van, F-150 Lightning Pickup and other models in its battery-powered lineup.

Following a $2.5 billion loan to LG Energy Solution and General Motors’ Ultium Cells, SK On became the second Korean battery company to get the green light from the ATVM program for a US joint venture. Meanwhile, a $7.5 billion loan for Samsung SDI and Stellantis’ Starplus Energy remains pending.

Sources say BlueOval SK secured approval from the Energy Department following the US government’s 18-month due diligence review. Last month, SK Innovation and SK On pledged a $4.82 billion financial guarantee for the loan, serving as third-party financing in the case of a default, which was instrumental in obtaining final approval.

The ATVM loan is expected to reduce the financial burden for the debt-ridden SK On to ramp up its production expansion in North America. In the third quarter of this year, the battery maker turned a profit for the first time since its establishment in 2021, though its debt remains at approximately 23 trillion won ($16 billion).

Despite the $9.63 billion loan, industry insiders say uncertainties lie ahead for the battery maker’s financing scheme for its US operations due to the second Donald Trump administration’s pledge to scrap the Inflation Reduction Act, which grants EV buyers a subsidy of up to $7,500.

While the ATVM loan program is not part of the IRA, it removed the $25 billion cap on the loan and allocated $3 billion in funds to cover the potential costs of issuing the loan. “It is challenging, even for Trump, to cancel a loan that had already been taken out,” said Lee Ho-geun, a car engineering professor at Daeduk University. “However, he could potentially accelerate the repayment schedule of the loan faster than the planned expiration date.”