Cell mega-factory on the South Shore | A bet of 3 billion

Northvolt will receive nearly 3 billion from Quebec and Ottawa to establish itself on the South Shore of Montreal, we have learned The Press. The Legault government is pulling out all the stops to convince the missing link in the battery sector and win over California: the State will become a shareholder in a promising young company, but which still has challenges to overcome.

Quebec is aware of the task that awaits it this Thursday, when the time comes to explain its 1.37 billion share of this “complex” financial package. It will include forgivable loans and an equity investment in the Swedish company, which was hesitating between the province and the American west coast. Added to this is a commitment of 1.34 billion from the Trudeau government.

Estimated at 7 billion, the Northvolt project will constitute the largest private investment in the history of Quebec. In particular, lithium-ion battery cells will be manufactured there, the last step before assembly. In addition to financial aid, the supply of clean energy tipped the scales in favor of Quebec, which overtook California. Together, the two levels of government provide nearly 40% of the funds needed for the project.

At first glance, Northvolt has it all. Its co-founders, Peter Mikael Carlsson and Paolo Cerruti, are two former protégés of Elon Musk at Tesla, where they were part of senior management in the early 2010s. They contributed to the growth of the American multinational. At Northvolt, the two businessmen built a company valued at US$12 billion less than a decade after its founding.

“Peter and Paolo are among those former senior Tesla executives who decided to strike out on their own in the battery industry,” explains Steve LeVine, of the publication The Electric, considered a reference in the industry. They have this sort of Tesla aura. They are both visionary and courageous. »

Additionally, auto giants like Volkswagen, BMW, Volvo and Scania are among Northvolt’s clients, which has also convinced institutions like BlackRock, Goldman Sachs and the Ontario Municipal Employees Pension Plan to invest. in its activities. This allowed it to obtain 9 billion US dollars through multiple financing rounds.

Proofs to be made

The young company established in Stockholm nevertheless has a lot of work to do before rising among the strong multinationals. Its challenge: deliver the goods to carve out a place alongside manufacturers like CATL and LG. Its financial needs are great to carry out several construction projects simultaneously. There is significant execution risk.

For example, the first phase of its first megafactory, in northern Sweden, has been completed, but cell and battery production has not yet reached full capacity. In Germany, home to another battery cell factory, we are still at the preparatory work stage.

Added to this is the North American breakthrough which will be confirmed this Thursday.

Bottlenecks to be expected

“They have not yet demonstrated that they can produce on a large scale,” admits Mr. LeVine. It’s difficult to do. At this point, it’s risky for them and for investors. This is a great achievement for Quebec because it is a promising young company. But we cannot say categorically that it will succeed. »

Most companies struggle when they have to step on the accelerator in factories. Suppliers often struggle to keep up, creating bottlenecks in the production sequence. At Tesla, a few years ago, they described the episode as “production hell” when they tried to produce more Model 3s.

It is therefore in this context that the Legault government will partner with Northvolt.

The Quebec government will not just lend money, as it did with Ford and General Motors for their cathode materials projects.

“I think it’s legitimate to ask questions, and unfortunately, no one can be sure that the investment in Northvolt is 100% safe,” says Robert Asselin, first vice-president of the Business Council of Canada and former director of the budget of federal Finance Minister Bill Morneau.

This risk-taking could nevertheless benefit the Quebec state. To finance its ambitions on both sides of the Atlantic, Northvolt is considering an IPO next year. If this scenario materializes and business goes well, the company’s stock could experience a surge upon its arrival on the markets, which would work in favor of Quebec’s investment.

From mining to recycling, the Legault government has so far announced projects at each stage of the battery sector. It remained to find a cellar, a void which will be filled with Northvolt.

Alone on board

Mr. LeVine also notes a particularity of Northvolt’s model: the construction of mega-factories by the company itself. Most of the time, automotive giants enter into a partnership with a battery specialist when the time comes to build a new complex.

“Peter and Paolo decided to launch into the mega-factory niche,” he says. It takes guts. Even Tesla decided to partner with Panasonic to start in the United States.

In Quebec, Northvolt will establish itself on land that formerly housed the Canadian Industries Limited (CIL) explosives factory. The site straddles the municipalities of McMasterville and Saint-Basile-le-Grand. Ultimately, more than 4,000 people could work in this complex which will cover an area equivalent to more than 75 football fields.

The Northvolt project relies on manufacturing units for battery cells, cathode materials and recycling. After reaching its cruising speed in terms of production, the factory would have a capacity of 60 gigawatt hours, which would make it possible to power 1 million electric vehicles annually.