Northvolt’s dire financial situation has prompted its lenders to turn to a New York investment bank, PJT Partners, “to suggest options.”
According to Bloomberg, which reported the news on Thursday, there is no question of restructuring or even bankruptcy regarding Northvolt.
PJT Partners describes itself on its website as “a proven advisor […] in situations where a company is experiencing financial difficulties”, “including financial debt restructuring, liability management” as well as the protection of insolvent companies.
As for Northvolt, according to Bloomberg, citing anonymous sources, “creditors are preparing for a range of scenarios.” The Swedish company’s main shareholders are Volkswagen (21%) and Goldman Sachs (19%). Northvolt has raised some US$15 billion since its founding in 2015. The Caisse de dépôt et placement du Québec (CDPQ) notably lent it US$200 million.
PHOTO CHARLES WILLIAM PELLETIER, ARCHIVES SPECIAL COLLABORATION
Louis Hébert, professor of strategy at HEC Montréal
“Northvolt’s problems seem serious, serious enough that lenders are looking at all possible options,” says Louis Hébert, a strategy professor at HEC Montréal. “Northvolt’s liquidity problems, what that underlines is that it’s a start-up, a startup.”
Announced in September 2023 at a cost of $7 billion, the mega-factory on Montreal’s South Shore, for which the provincial and federal governments have promised $2.74 billion, will likely not begin operations in 2027 as planned. The Legault government has mentioned a delay of 12 to 18 months.
Review and public aid
The delay followed a string of bad news for Northvolt. Last July, company co-founder Peter Carlsson admitted that it had expanded “a little too aggressively.”
Amid slowing global demand for electric vehicles and competition from China, Northvolt has announced a strategic review of its operations. The company failed to ramp up battery cell production at its first plant in Sweden, leading BMW to cancel a $3 billion order last June.
Northvolt has notably abandoned its plans for a second plant in Sweden, specializing in cathodes. The plant in Heide, Germany, scheduled for 2026, is still in the plans.
On Monday, without giving specific figures, the company announced a reduction in its activities and job cuts, it has nearly 6,000 employees. On Tuesday, another blow fell on the young company, when Sweden refused to come to its rescue. Without committing to participate in a possible financing round, Volkswagen and the Swedish truck manufacturer Scania have however publicly assured that they will support Northvolt.
“Northvolt doesn’t necessarily have the foundations, the financial resources of a well-established company and, as often happens with the rapid growth of an emerging company, there are money problems,” Louis Hébert points out. “In Quebec, Lion or Taiga, it’s a bit of the same problem: when you want to increase the scale of production, you realize that it costs a lot more than you had anticipated.”
Does he believe that the Northvolt plant in Saint-Basile-le-Grand will one day be operational? “For me, this question of electrification of transport is not a question of ‘if’, but of ‘when’,” he replies. These radical or technologically important transitions, we often tend to overestimate their speed in the short term. […] The electrification of transport requires major changes throughout the value chain.