South Korean electric vehicle (EV) battery manufacturer LG Energy Solution (LGES) said NextStar Energy, its Canadian joint venture with Stellantis, had reached a final agreement with Canadian federal and provincial governments on the terms of subsidies for their plant under construction in Ontario.

The parties signed a binding agreement which LGES said put construction of the battery module manufacturing facility in Windsor “immediately back on track”.

The final deal comes two months after construction was suspended over delays by the Canadian federal and provincial governments in agreeing details of the government incentives.

Canada has now agreed to match the incentives offered under the US Inflation Reduction Act (IRA), which provides tax credits of up to US$7,500 to buyers of EVs produced in North America. Batteries are a key part of this incentive programme.

The delay in agreeing the financial package had been linked with a similar investment by Volkswagen which planned to build a major battery manufacturing facitory in St Thomas, Ontario.

The first phase of construction of NextStar Energy’s CAD5bn (US$3.8bn) battery plant was scheduled to be completed in 2024, with the facility expected to ultimately have a production capacity 45 gigawatt hours (GWh) of batteries per year and employ around 2,500 people.

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Mark Stewart, chief operating officer for Stellantis North America, said in a statement: “We are pleased that the federal government, with the support of the provincial government, came back and met their commitment of levelling the playing field with the IRA. This collective effort enabled the deal to close and we are now resuming construction on the site in Windsor.”

Kim Dong-myung, president of LGES’ automotive battery division, added: “We are happy to finally move forward with building the country’s first major battery plant and be a central part of the local battery ecosystem.”