What to do with Northvolt? Basically, nothing. Because for Quebec, there is nothing to do for the moment, except wait and cross your fingers.
Commentators are already concluding a fiasco. They exclaim, barely hiding their joy: I told you so!
True, the Legault government’s bet is enormous, it bodes ill and it could prove ruinous. But it is not impossible that it becomes a winner in the long term. The only honest answer is that we don’t know yet.
However, there is a virtual certainty. If Quebec panics and tries to reduce its commitment to the project now, it will lose.
It’s like a stock market investment that falls. When the storm hits, it’s best to ride it out. Decisions made out of emotion often end up being regretted.
The Legault government has its hands in a twist. He has no control over the destiny of the planned factory in Saint-Basile-le-Grand. Everything will be played out thousands of kilometers away, in Sweden.
The opposition asks Mr. Legault to promise not to spend “one cent more” in Northvolt. He refuses to do so, and that is understandable.
The question does not arise at the moment. The first part of public assistance in Quebec has been completed, with 240 million for the purchase of the land as well as a convertible loan of 270 million in the parent company in North America.
The next step would be to add 297 million to build the factory. The sum is expected to be transferred into preferred shares in the company. This amount could be revised downwards.
But we are not at that stage, far from it. Before getting there, Northvolt must update its restructuring plan. Then, major international creditors like Volkswagen and Goldman Sachs will decide whether to improve their financing.
To convince them, Northvolt must accelerate production at its main Swedish factory. And quality too – a certain volume of battery components is produced at a loss initially. These losses will have to decrease to reassure investors.
It is only when this step is completed that the question of the factory in Quebec would arise again. Before adding money, the CAQ government has already imposed some conditions. Among them: that the private sector also finances it and that the order book is filled.
If private investors don’t move, Quebec won’t move. The ball is therefore in their court. If these big players are convinced by Northvolt’s plan, Mr. Legault will be able to sell his adventure more easily.
After the money in construction, it would match American subsidies during the manufacturing stage of battery cells and cathodes.
But if Mr. Legault refuses to put in more money, this would compromise the agreement and the completion of the project.
Of course, the land can be resold. But it would undoubtedly be resold at a loss – remember that it was bought from a group made up of speculator Luc Poirier, at a value four times higher than its valuation made in 2020.
Northvolt’s miseries need to be put into context. Like its competitors, it is suffering from global economic sluggishness and weaker-than-expected demand for electric vehicles.
But unlike them, it is a relatively young company that has never yet made a profit. It is burning cash hoping to quickly improve the quality and volume of its production.
In the past, companies have followed this trajectory before becoming billionaires. Others went bankrupt.
The market for green vehicles will eventually replace that of gasoline models. Change is inevitable. The question is whether Northvolt will hold on long enough to participate.
For now, the sector is cooling. In 2023, it was enough to say “green batteries” for private and public dollars to flow. This is no longer the case.
In the National Assembly, the opposition is doing its job, hot on the heels of the CAQ government. Mr. Legault was still consistent with his promises. He wanted to review the role of Investissement Québec so that the state corporation intervenes more energetically in the economy, by taking risks.
This is what it did by injecting a huge amount of money in loans and equity investments. But with Northvolt, Quebec also got caught up in competition between states which were outbidding with subsidies to attract battery manufacturers.
The results are not all bleak. Certainly, Northvolt represents almost half of the investments in this sector. But in Bécancour, the industrial park has filled up, thanks among other things to the GM and Ford factories.
Mr. Legault argues that it is the average that is important. Some 650 million public loans are at risk, revealed Thursday my colleagues Tommy Chouinard and Julien Arsenault1. In return, it would be necessary to evaluate the anticipated gains with projects such as those in aerospace which are doing better.
With Northvolt, Mr. Legault bet big, but it is too late to go back. And today, panic is the worst option.
1. Read the report “Some 650 million public loans at risk”