Governments have pledged more than €2.7bn to Swedish gigafactory manufacturer Northvolt over its lifetime — but only €531m of that is confirmed to have hit the company’s bank account, Sifted has learnt.
The majority of funding from governments — including nearly €1bn from the European Union — is contingent on the embattled startup hitting certain milestones on its factories, meaning it’s unlikely to help the company’s immediate search for cash.
Several public pension funds have also invested upwards of €2bn in the company but, in these cases, the capital has been handed over.
Northvolt has raised €15bn in debt and equity since it was founded in 2015. It’s on the hunt for fresh funds after announcing plans to lay off 1,600 of its staff and the closure of one of its factories.
And with Northvolt’s footing shaky, questions are mounting over how much it will cost taxpayers if the company defaults on its loans or folds entirely. Much of the government money pledged to Northvolt has not yet been paid out, but pension funds are more exposed.
€943m from the European Union — yet to be handed over
The EU was an early backer of Northvolt. In 2018, the European Investment Bank (EIB) funded its demo line with a €52.5m loan. In 2020, it doubled down, giving the company a €319m loan for the initial phase of its first gigafactory, Northvolt Ett in Sweden.
In January this year, the EIB went even bigger, with €943m in debt financing to support the expansion of Northvolt Ett. This loan is secured by a guarantee from Riksgälden, the Swedish National Debt Office, meaning, should Northvolt default, Riksgälden would cover the debt — in this case up to 80%.
It’s a significant chunk of cash but the EIB is yet to hand it over, a spokesperson for Riksgälden tells Sifted. The money is ring-fenced for the expansion of Northvolt Ett, which is yet to begin.
A spokesperson for the EIB tells Sifted that its outstanding loans to Northvolt currently stand at $313m (€280m). Given the €943m is yet to be handed over, the amount will be the remainder of Northvolt’s previous loans from the EU.
€902m from Germany
In March 2022, Northvolt announced that it would build a gigafactory in Heide, Germany. Construction began in March this year — Chancellor Olaf Scholz marked the occasion with a trip to the site.
In January the European Union approved a €902m package from the German state to Northvolt.
The €902m deal includes €700m as a direct grant and €202m in loan guarantees. The grant was due to be paid in monthly instalments across 2024 and 2025, depending on the implementation of the project and the costs it incurs each month, a spokesperson for the EU Commission — who had to approve Germany’s decision to offer the aid — told Sifted last week.
It’s not clear how much of it, if any, has been sent to the company so far. Northvolt and a representative for the German government didn’t respond to requests to comment.
The German government has agreed that it will cover the cost of the €202m loan guarantee should Northvolt fail to pay it back. It “will be triggered only in the event Northvolt will default”, a Commission spokesperson told Sifted.
€473m from Québec
One of the most contentious areas is Québec. In 2022, Northvolt announced it was building a $7bn factory there, set to be one of the largest infrastructure projects in the Canadian province’s history.
Opposition leaders have called on the Québec premier, François Legault, to outline the terms of the CA$710m (€473m) of public funds committed to the project — a combination of a loan and equity investment into Northvolt’s parent company.
CA$240m (€160m) of that was a loan to help Northvolt buy its site in Canada, 30km east of Montréal. Last week, François Legault said that was the only money of the total €473m that had so far changed hands, and Northvolt confirmed to Sifted that it received it last year.
Then there are two commitments into Northvolt’s Swedish parent company, both convertible notes. One is a CA$200m (€134m) investment from state pension provider Caisse de dépôt et placement du Québec (CDPQ); the other CA$270m (€181m) from Invest Québec, the Québec government’s investment arm.
A further CA$300m could be allocated to Northvolt if it hit certain milestones, the Québec government has said. Those milestones include the financing for the project being completed and the plant being under construction — both of which are yet to happen.
Several Canadian pension funds are also invested in Northvolt’s parent company. The Investment Management Corporation of Ontario (IMCO), Canada Pension Plan Investment Board (CPP Investments) and CDPQ have collectively invested around $1.1bn into the battery maker, according to Reuters. Canadian public pension fund OMERS has also been a long-term backer of Northvolt.
Nordic pension funds
Sweden, where Northvolt is headquartered, has invested far less into the company than countries like Germany and Canada. In total, through a variety of grants, Northvolt has received SEK 625m (€55m) in government money from Sweden.
The other Swedish public money invested in Northvolt comes from pension funds, several of which are on the battery maker’s cap table.
The four subfunds, AP1-AP4, of AP-fonden, which is the leader of the Swedish public pension system — have invested SEK 5.8bn (€513m) in equity and convertible notes in Northvolt and hold a 3.7% stake in the company.
The pension fund with the biggest share in Northvolt is the Danish pension fund ATP, which has invested DKK 2.3bn (€308m) and owns around 5.3% of the company.
Other pension funds, like Swedish pension fund AMF, have invested SEK 1.9bn (€168m) and own 2.8% of the company, while Folksam Group has invested a total of SEK 1bn (€88m).
In total, pension funds have invested around €2bn of employees’ pensions into the gigafactory. The capital has — in comparison to most of the government money — been paid in full.
With significant amounts of Northvolt’s debt commitments yet to be handed over, the German state and European Union are relatively insulated from the company’s woes. The Swedish and Canadian pension funds have the greatest exposure should Northvolt fail to secure the cash it now needs.
Read the orginal article: https://sifted.eu/articles/northvolt-government-funding/
