Northvolt: the Caisse considers its $200 million investment risky

The Caisse de dépôt et placement revealed Thursday that it considered its $200 million loan to Northvolt to be a high-risk investment.

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“The Caisse analyzed this investment with a risk/return framework of venture capital, which applies to projects or companies in development,” indicated the institution in an email sent to Journal.

“As we are dealing with a developing company, in an emerging and growing sector, the level of risk attributed to the file is obviously not the same as that of a mature company,” she added.

Venture capital is a form of investment that allows young, generally unprofitable companies to obtain financing for innovation projects whose probability of success is uncertain.

Founded in 2015, Northvolt is a Swedish start-up that has raised more than US$10 billion (CA$14 billion) in funding to date, mainly in the form of venture capital.

For an investor like the Caisse, venture capital presents higher risks than those of a traditional investment, but also a more substantial return potential.

“Rigorous process”

The institution also confirmed to Journal that “the transaction in Northvolt was submitted to the Investment-Risk Committee”.

“All investments [de la Caisse]without exception, go through a rigorous risk process that evaluates transactions from different angles (financial, tax, ESG, legal, technology, etc.),” the institution specified.

Last year, the Caisse refused outright a request for access to information from the Journal seeking documents detailing the approval process for the institution’s investment in Northvolt, primarily citing confidentiality reasons.

Discretionary investment

Note also that the investment of $267.7 million made by the Ministry of the Economy in Northvolt in December 2023 was not made as part of a specific government program.

Rather, it is a discretionary investment made under an article of the Investissement Québec Act relating to “projects that are of significant economic interest to Quebec.” These projects are generally considered risky.

Quebec also granted Northvolt a guaranteed loan of $240 million to allow it to purchase a large plot of land in Montérégie where the company plans to build its facilities.

In total, Quebec has committed to paying financial aid totaling $1.37 billion to Northvolt, while Ottawa has promised $1.34 billion. To this must be added “production incentives” which could reach $4.6 billion (two-thirds assumed by Ottawa and one-third by Quebec).