A battery manufacturing joint venture between LG Energy Solution and Stellantis will receive state incentives from the Canadian government equivalent to what the U.S. Inflation Reduction Act (IRA) subsidy program offers, the companies said Thursday.

With NextStar Energy reaching a binding agreement with the local government, the joint venture will resume construction of its electric vehicle battery manufacturing plant in Ontario, Canada, which has been halted since May.

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

LG Energy Solution, a Korean battery maker, announced its plan to build a 4.5-million-square-foot (103-acre) lithium-ion battery factory with a production capacity of 45 gigawatt-hours in Windsor, a southwestern city in Ontario, with Stellantis in March last year. The two companies established NextStar Energy for the project, of which LG Energy Solution holds 51 percent and Stellantis the rest.

The $3.7 billion project was estimated to create 2,500 new jobs in the region. The commercial operation is set to begin in 2024.

In May, LG Energy Solution and Stellantis halted construction of the Ontario plant, saying that the Canadian government did not provide the undisclosed total of incentives that was promised beforehand.

LG Energy Solution and Stellantis have been demanding Canada increase incentives after the U.S. IRA was enacted in August, according to media reports.

In April, the Canadian government provided tax credits worth 13 billion Canadian dollars ($9.8 billion) and grants worth 700 million Canadian dollars to Volkswagen, a German carmaker, to bring its battery plant into the country.

While no further details on the agreement have been provided, NextStar Energy is believed to have received government incentives worth as much as 19 billion Canadian dollars, according to the local news outlet Windsor Star.

“We are deeply grateful to the Korean government for its support in proceeding with the deal, and also to the Canadian government for its tireless effort,” said Kim Dong-myung, LG Energy Solution president and head of the Advanced Automotive Battery Division, in a release.

In May, Canadian Prime Minister Justin Trudeau met with President Yoon Suk Yeol during his state visit to Korea. He also attended meetings with executives of LG Energy Solution.

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]