WASHINGTON, July 9 (Reuters) - The U.S. Department of

Energy's loans office said on Tuesday it issued a conditional

loan of up to $1.2 billion to ENTEK Lithium Separators LLC to

finance a plant in Indiana for making lithium-ion battery

separators used mostly in electric vehicles.

Battery separators play a key role in the performance and

safety of lithium-ion batteries.

Based on current factors chosen by battery cell

manufacturers, the project will support roughly 1.9 million

mid-size EVs or 1.3 million electric sports utility vehicles,

ENTEK said in a release. The project, in Terre Haute, Indiana is

expected to create more than 760 construction jobs and 635

operational jobs, it said.

"There has never been a more exciting time to be a

manufacturer in the battery industry," ENTEK CEO Larry Keith

said.

If finalized, the loan would be offered through the Advanced

Technology Vehicles Manufacturing Loan Program that has $40

billion in direct lending authority.

Separators produced at the plant will accommodate all

existing lithium-ion EV battery chemistries, the LPO said.

Automakers face increasingly stringent requirements in order

to qualify for $7,500 EV tax credits. New rules took effect on

Jan. 1 restricting Chinese content in batteries eligible for EV

tax credits of up to $7,500, which sharply cut the number of

eligible vehicles. Automakers have since made changes to supply

chains and won restored eligibility for many vehicles.

DOE estimates that by 2030, the North American

lithium-ion EV battery industry will require annual separator

production of 7 to 10 billion square meters. DOE estimates the

project will support roughly 1.9 million mid-size EVs or 1.3

million electric SUVs.

It is unclear when the loan will be finalized.

In June 2023,

DOE said it intended to loan the

Blue Oval SK joint venture of Ford Motor ( F ) and South

Korean battery maker SK On, a unit of SK Innovation,

up to $9.2 billion to help finance construction of three new

battery manufacturing plants in Tennessee and Kentucky. The loan

for the Ford SK joint venture has still not closed.