Northvolt declares bankruptcy in Sweden, Quebec wants a ‘buyer who will invest’

After failing to reach a rescue deal and after an exhaustive effort to explore all available means to ensure a viable financial and operational future for the company, Northvolt announced Wednesday that it has filed for bankruptcy in Sweden.

The EV-battery startup was not able to secure the financial conditions necessary to continue in its current form.

“Like many companies in the battery sector, Northvolt has faced a series of successive challenges in recent months that have eroded its financial position,” the company said in a statement, “including rising capital costs, geopolitical instability and resulting supply chain disruptions, as well as changes in market demand. In addition to this context, the company also faced significant internal challenges related to the increase in production. Some were predictable due to this highly complex industry, while others were not.”

In Quebec, the Legault government has invested $270 million in Swedish parent company Northvolt AB. The Caisse de dépôt et placement du Québec also invested $200 million in the Swedish company.

On Wednesday, the Legault government said it hopes that a “buyer who will invest to take over all activities in North America” ​​will be found in the Northvolt file.

Despite the bankruptcy of Northvolt AB in Sweden, Northvolt North America “remains solvent” and “intends to honour its obligations and meet its financial commitments in the normal course of business, including to its employees.”

On social media, Quebec’s Minister of Economy and Energy, Christine Fréchette, announced that the government’s wish is for “the controller to begin looking for a buyer who will invest in taking over all activities in North America to relaunch the project.”

She indicated that Quebec will “quickly” contact the controller.

“We are obviously disappointed by the situation. However, it should be remembered that several other battery industry projects are continuing in the regions of Quebec,” notably in Bécancour, she wrote on X.

Quebec also granted Northvolt $240 million to purchase the land in Montérégie. According to Fréchette, this sum is secured by securities on the land and the assets of the Northvolt North America subsidiary.

Northvolt is planning a mega-battery factory in the Montérégie region. The plant, to be built in Saint-Basile-le-Grand and McMasterville, is a $7 billion project in which Quebec and Ottawa have committed to investing $2.4 billion.

In Ottawa, Industry Minister François-Philippe Champagne revealed that discussions are already underway behind the scenes to find a buyer for Northvolt’s North American operations.

“I’ve always said that the Northvolt plant in Quebec is important,” he said at a press conference. “Northvolt’s profitability depends on the North American plant, because we know that the North American market is the most important.”

Champagne categorically ruled out a possible scenario in which China would take over Northvolt’s operations in Quebec, but added that he hopes “this investment will continue.”

“Waste of Quebecers’ money”

The opposition parties in the National Assembly accuse the CAQ government of having invested heavily in a risky project, while presenting it as a safe bet.

“Remember the Prime Minister who swore that this money was guaranteed. Remember Minister Fréchette who repeated the same thing. It wasn’t true. The CAQ government is the only one to have invested public money in the parent company in Sweden without guarantees,” lamented PQ MNA Pascal Paradis, on X.

The Liberal Party believes that the Legault government must be accountable for the money it “bet” on Northvolt, which it ultimately “lost everything.”

“Yet another resounding CAQ failure for which Quebecers are paying the price,” denounced MP Frédéric Beauchemin.

On the Québec solidaire side, MP Alejandra Zaga Mendez argued that while a trade war is underway with the United States, the Northvolt case is “another demonstration of this government’s lack of economic judgment.”

Financial difficulties

The Swedish bankruptcy announcement is a new twist in Northvolt’s financial difficulties, which have been well documented in recent months.

In November, Northvolt AB and certain of its subsidiaries filed for Chapter 11 bankruptcy protection.

According to Reuters, the company was seeking to raise $1.3 billion in financing over the next two years.

Two months earlier, the parent company had announced the layoff of 1,600 employees in Sweden, a fifth of its workforce.

On Wednesday, Northvolt acknowledged that it has faced “a series of successive challenges in recent months that have eroded its financial position,” noting that some of these challenges have also affected other companies in the battery sector.

Rising capital costs, geopolitical instability, supply chain disruptions and changes in market demand are factors that have impacted its financial health.

The company also admitted that it faced internal challenges related to the increase in production. “Some were predictable given this highly complex industry, while others were not,” it said.

Northvolt interim chairman Tom Johnstone described it as an “incredibly difficult day for everyone” at the company.

“Northvolt has come a long way, and we are beginning to see the real results of our work,” he said.

“For me personally, it remains essential that Europe has a local battery industry, but building such an industry is a marathon. It requires patience and long-term commitment from all parties involved,” he argued.

-With files from The Canadian Press