One of the features that could be creating doubt is the absence...

One of the features that could be creating doubt is the absence of receipt of grants by other ASX listed companies that have previously received DoE Grants from the same program.

PLL - Piedmont Lithium
PLL had an ASX announcement on 19 Oct 2022 around being selected for a Grant of up to US$141.7m in relation to their proposed Tennessee Lithium Hydroxide plant that was then being estimated as a US$600m project from a PEA study. On 20 April 2023 PLL released a DFS on the Lithium Hydroxide plant and the capital cost had expanded out to US$809m. As part of PLL's 7 Nov 2023 announcement they noted a decision to seek a ATVM loan rather than progress the grant.


SYR - Syrah Technologies
SYR secured DoE loan funding towards the first stage of their Graphite project. On 20 Oct 2022 they announced being selected for a Grant of up to $220m in relation to the 45ktpa AAM production facility. On 27 April 2023 SYR released an DFS for the AAM 45ktpa facility. The capital cost was now US$538.6m. The project funding statement at the end of the DFS noted looking at a much larger DOE loan than was available via Grants. SYR's 2023 AR also notes an Event of Default had occurred making all the borrowing current. Trying to get loans/grants when in default on existing T&C's is never easy and may be part of why SYR's accounts don't show or reference the US$220m grant two year later.

Implications
Neither company had near-term updates about the grant. Both of these companies started with the same late October 2022 Grant notification and released DFS's almost exactly 6 months later. From a sample of 2, it would appear that companies need to complete a DFS within 6 months of agreeing to potentially receive the grant. That's not an unreasonable expectation by DoE given the companies concerned will already have completed some sort of feasibility study.

Around one year after the notification of the potential grants, both SYR and PLL were talking about seeking ATVM loans. Both companies would appear to have had huge funding gaps on their projects and may have made the commercial decision that the ATVM loans which are possibly 60-70% of the projects total value were more desirable than a smaller grant and a huge CR at an already depressed share price. Its also distinctly possible that the DoE had a grant condition of FID within 1-2 years of seeking the grant. Both SYR and PLL became aware they would not hit the Grant FID timeline and deflected on the failure to hit that grant condition by going for loans instead.

What this may have done is create ASX investors thinking the DoE grants are nice, but they don't eventuate. That would help in understanding why the market hasn't responded as I thought it might. On the timeline E25 is aiming for, a DFS within 6 months and FID within a year to perhaps 18 months would be conditions they should meet (if serious about delivering a HPMSM plant!!).

I'm going to make the assumption that the $289m capital cost has gone up ~4.5% and is now US$302m. If the project was $302m with a 50% funding limit by DoE then the DoE would be allowing for a $151m cost. If DoE then added a 10% contingency, the potential grant would become $166.1m - the exact value advised.

The spreadsheet below looks at what E25's June 2024 balance sheet would look like with the following adjustments:

• The HPMSM capital cost is US$302m
• The DoE grant is capped at 50% of the capital costs and therefore US$151m (AUD $220.9m @ 0.6835, the exchange rate between $166.1m / A$243m)
• No taxation is payable on the grant (I'm unsure on this but from a web search at least some DoE grants are tax exempt).
• Stellantis and GM collectively provide US$115m of loans
• E25 is successful in securing the remaining $36m in loans for a total of US$151m
• No adjustment is made for interest payable on loans, Butcherbird expansion or ongoing operational results

If this funding package were to occur, E25 would have loan borrowing of around 44% of total assets. Net assets increase to ~A$278m. E25 currently has 219.9m shares on issue so this would be A$1.26/share in net assets.