Northvolt: $1.5 billion financing guarantee on ice in Europe

Northvolt’s recent decision to suspend the expansion of its factory in northern Sweden puts valuable $1.5 billion in funding on ice, the Swedish government said.

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Facing serious financial difficulties, the battery manufacturer announced the layoff of 1,600 employees in Sweden just a few weeks ago, as part of its major “strategic review”.

The company, which has a $7 billion factory project in Quebec, hopes to breathe a little by banking on accelerating battery production at its Skellefteå factory, in northern Sweden, even if it comes to put its expansion project there on hold.

This decision is not without consequences. At the start of the year, Northvolt managed to raise US$5 billion – the equivalent of approximately Canadian $7 billion – to expand the Skellefteå factory, with the aim of tripling its production capacity.

Guarantee

The lenders, including the European Investment Bank, the Nordic Investment Bank and more than 20 commercial banks, then received guarantees totaling US$1.5 billion from the Swedish government.

However, there is little chance that this money will be paid to Northvolt in the near future, said the director general of the Swedish Government Debt Office, Karolina Ekholm, in a statement to Reuters.

“Last week, the company announced the suspension of its expansion. According to our assessments, the loans will therefore not be able to be disbursed in the near future,” she said, specifying that the guarantees were only valid if the conditions of the basic agreement were met.

BMW

Furthermore, Bloomberg reported on Thursday that BMW, which owns 2.8% of Northvolt’s shares, is not ready to invest more money in the battery manufacturer.

Earlier this year, the German automaker canceled a US$2.2 billion order for batteries from Northvolt, emphasizing that it would instead work with the company to develop battery cells.

Other automakers, including Volvo and Volkswagen, have also slowed their electrification plans as demand for electric vehicles loses steam around the world. Remember that Volkswagen is the main shareholder of Northvolt, with 21% of the shares.

Despite the strong headwind, Northvolt continues to maintain that its battery factory project in Quebec is still on the cards. The Legault government has indicated that it expects delays of 12 to 18 months.