WSJ News Exclusive | Koch Industries, Built on Oil, Bets Big on U.S. Batteries

Founded more than 80 years ago as an oil refiner, Koch Industries is now the most diversified U.S. battery investor, said

Vivas Kumar,

a former

Tesla Inc.

senior manager and industry analyst who last year launched a battery-parts startup. “It’s stunning just how many different battery supply chain players they’ve taken a stake in,” he said.

Koch Industries is now a top shareholder in startups such as

Freyr Battery SA,

FREY 4.41%

Aspen Aerogels Inc.

ASPN 7.29%

and

Standard Lithium Ltd.

SLI 5.61%

The money comes at a crucial time for many of these companies, which need to spend heavily to commercialize their products. Koch appears to be focused on building up the battery industry in the U.S.

“The speed of the energy transition is directly correlated with companies like Koch participating in it,” said

Tom Jensen,

CEO of Freyr, a Norway-based company working to make low-cost, sustainable batteries. Koch Industries has a 10% stake in Freyr, which was worth about $120 million as of the end of last year, according to FactSet. The companies have a joint venture to make batteries in the U.S.

Koch Industries, based in Wichita, Kan., declined to comment about its battery investments. It has said little publicly about its battery strategy. The company has made the investments through Koch Strategic Platforms, a subsidiary of its investment group that it launched in late 2020 to invest in the energy transition, computing, automation and healthcare.

Koch Industries operates thousands of miles of pipelines that move oil and gas around the country and several large refineries. The company posts annual sales of about $120 billion through brands such as Brawny paper towels and Dixie cups, fertilizers and fabrics.

Chief Executive Officer

Charles Koch

and his late brother David donated billions of dollars to conservative and libertarian political causes, including some that opposed environmental regulation and questioned whether climate change is a problem.

One of the groups they have backed, Americans for Prosperity, has fought efforts by the Environmental Protection Agency to regulate carbon emissions. They have donated to the Competitive Enterprise Institute and the CO2 Coalition, both of which also supported former President

Donald Trump’s

2017 withdrawal from the Paris climate accord, argue against the benefits of electric vehicles and question whether global warming caused by the burning of fossil fuels is a major issue.

In late 2020, Charles Koch, then 85 years old, wrote in a book that his partisanship was a mistake and said he hoped to address societal problems. His company’s political-action committee has continued donating heavily to Republican candidates.

Koch Industries has targeted companies that aim to provide raw materials for batteries, including lithium producer Standard Lithium and battery recycling company

Li-Cycle Holdings Corp.

LICY 1.41%

Most battery materials are produced overseas, often in China, and shortages have driven up prices.

The company has also backed startups out to make better batteries, such as

Solid Power Inc.,

SLDP -5.23%

a maker of solid-state batteries that is backed by

Ford Motor Co.

and

Bayerische Motoren Werke AG

.

Aspen Aerogels

makes products that boost battery performance.

Koch has made the wagers through a combination of equity stakes and convertible debt that would become equity if share prices rise.

Shares of many of the companies have been volatile, with many clean-tech startups down recently on Russia’s invasion of Ukraine, interest-rate increases and supply-chain disruptions swinging markets. Short sellers who wager on share-price declines have bet against Standard Lithium, arguing that the company’s technology doesn’t work. Koch has said it conducted extensive due diligence before investing and is excited about Standard’s potential. Standard has called the accusations false and misleading.

Some analysts expect Koch Industries’ investments will spur others to follow them.

“When you see these large players jumping in the pool, you have to wonder, ‘What do they see that I don’t?’ ” said

Chris Berry,

founder of House Mountain Partners LLC, an adviser to battery-metals companies and investors.

—Ben Foldy contributed to this article.

Write to Amrith Ramkumar at [email protected]