Northvolt prepares to protect itself from its creditors | The battery industry

Swedish battery manufacturer Northvolt is preparing to invoke Chapter 11 of the United States bankruptcy law to protect itself from its creditors, while maintaining control of its activities, - has learned. The decision, expected in the coming days, should not call into question the continuation of the project in Quebec, according to the governments.

In the last days, Swedish media and the news agency Reuters reported that discussions were taking place internally about filing for Chapter 11. The Financial Times even mentioned the possibility of pure and simple bankruptcy under chapter 7 of this law, with liquidation of assets, but this possibility has been ruled out, according to our information.

- was able to obtain confirmation that Northvolt AB, the company’s parent company, has not yet succeeded in concluding its short-term financing call of $415 million which would allow it to resolve its liquidity problems until at the beginning of 2025.

Northvolt does not deny that it is preparing to file for Chapter 11, but does not confirm it either.

Its spokesperson for North America, Emmanuelle Rouillard-Moreau, responded to - that negotiations surrounding financing continue and that the company remains in close contact with [ses] investors and key partners and the outcome of these discussions will be communicated when decisions have been made.

Prime Minister François Legault mentioned, Tuesday, information future, in the next few hours.

Earlier this week, Northvolt appointed restructuring expert Paul O’Donnell as chairman of the Swedish plant’s board of directors. He took the place of CEO Peter Carlsson, who remains with the organization.

Chapter 11 allows for financial reorganization

With Chapter 11 of the United States Bankruptcy Code, the troubled business can reorganize its finances and restructure its debts without liquidating its assets.

It can also continue its activities without a bankruptcy trustee intervening in decision-making and without creditors being able to demand recovery or seizure. The restructuring plan will be submitted to a vote by creditors.

It is the existence of a subsidiary of the company in North America which allows Northvolt to use American law, considered more lenient with companies.

According to Pierre Fortin, president of Jean Fortin and associates, authorized insolvency trustee, Northvolt will have to follow a procedure in each country where it is locatedbut he adds that often, everything is headed by a conductor who coordinates the different legal procedures in the different countries, this allows for a certain cohesion.

The big question is what will happen with the investments that the Quebec government has made in Sweden and also, what will happen with the project here, in Quebec.

Investissement Québec has already injected $510 million into Northvolt, on behalf of the Legault government, and the Caisse de dépôt et placement, 200 million.

Quebec would therefore be on the list of creditors with Northvolt’s major lenders, Volkswagen, Goldman Sachs and several others.

[Le gouvernement Legault] can’t do much with money already invested, but might decide not to honor promised grantssays Pierre Fortin.

Quebec has promised aid of 1.37 billion for the construction of the factory and subsidies of 1.5 billion for the production of batteries.

For its part, Ottawa has promised 1.37 billion for construction and 3.1 billion for production, but the federal government has not yet paid a single dollar.

In Sweden, the government refused to come to the aid of Northvolt or become a shareholder in the company.

The Legault government has already said that the land, purchased for $240 million, would return to it if the project was abandoned.

In Ottawa, the federal Minister of Innovation, Science and Industry, François-Philippe Champagne, said Wednesday that he remain confidentmore prudent. He contacted Northvolt to get the facts: What I understand is that the project in Quebec continues and yes, there are discussions in Europe.

What is happening in Europe is one thing. What’s happening in North America is another thing. […] They have the cash to move forward with the project, currently, in Quebec.

In Quebec, the Minister of Economy, Innovation and Energy, Christine Fréchette, declared on Wednesday, we are very attentive to what is happeningwhile ensuring that the project planned in Quebec remains intact et remains a priority for Northvolt and for us.

Prime Minister François Legault was more evasive. Questioned several times in the National Assembly, he did not want to say if he still believed in the Northvolt project, recalling that he was waiting for information.

The leader of the official opposition, Marc Tanguay, seized the situation, saying that the Prime Minister is not not able to confirm to us that he still believes it.

A year ago, it was Klondike, we were going to be rich with Northvolt. And there, today, he is not even capable of reassuring Quebecers, who have already invested 710 million.

François Legault responded that the investment in the Swedish company had been a calculated risk and that batting average is what matters. He also claimed that Quebec’s economy has never performed as well in 20 years as it has now.

The Prime Minister and Christine Fréchette, in turn, made the list of good shots in government investments and Northvolt was not on the list.

Expected news from the Quebec project

By the end of fall, Northvolt North America must announce its plan to restructure the project in McMasterville and Saint-Basile-le-Grand, which would be delayed by at least a year.

As part of Northvolt AB’s call for short-term financing, the investment bank Goldman Sachs agreed to reinject more money, but on the condition of obtaining guarantees on the subsidiaries, including that of Quebec. The Legault government initially considered accepting it, before closing the door after the information became public.

According to the latest news, Northvolt AB planned to launch another financing request, even more ambitious, in 2025, to compensate for its lack of liquidity in the longer term.

Even though the Swedish company has signed battery order contracts worth tens of billions of dollars, it is struggling to produce at the expected rate. Its Swedish factory is far from reaching full capacity, which limits sales and therefore cash inflows.

The company has already admitted that its development strategy had been a little too dynamic and that the company had launched too many factory projects at the same time.

Last month, the company cut 1,600 jobs and refocused its activities around battery production to ensure the success of its rescue plan.

With the collaboration of Aude Garachon and Louis Blouin.