Northvolt | Ottawa warns Quebec on redistribution of energy block

(Quebec) The federal government is warning Quebec against redistributing to other companies a block of energy reserved for the Swedish company Northvolt for its battery factory project in Montérégie.

Ottawa, which, like Quebec, has invested in the project which will total 7 billion, suggests that partially withdrawing the electricity supply which is nevertheless guaranteed would not bode well for the construction of the plant.

It was the Minister of Innovation, Science and Industry, François-Philippe Champagne, who issued this warning, while the Swedish battery manufacturer is currently experiencing serious financial difficulties and has announced the loss of 1,600 jobs in its factories.

Faced with pressure from opposition parties, the Legault government opened the door Tuesday to reallocating part of the 354 megawatts of electricity promised to Northvolt to other companies in demand, while waiting for the Northvolt plant to be fully operational.

“It’s a decision that belongs to Quebec, but I’m not convinced that it would be a good thing now because I think what we want is to see the Northvolt project take off,” Mr. Champagne said in a press scrum in Montreal on Wednesday.

Prime Minister François Legault repeated in the House on Wednesday that his Minister of Economy and Energy, Christine Fréchette, never said that “in the short term, she would withdraw the energy block from Northvolt.”

The minister said she was first waiting for the new timetable from Northvolt, which apparently is open to sharing its energy block in the meantime before the plant is fully operational.

The Legault government has been attacked from all sides for several weeks because of Northvolt’s setbacks: the battery sector, touted as the new James Bay by Premier Legault, is becoming a “Waterloo” because of Northvolt, thundered Liberal MP Marwah Rizqy on Wednesday.

The value of public funds invested by Quebec is close to a billion dollars and the opposition parties have tried in vain to find out whether this portfolio is now devalued because of the turmoil.

In the event of a “catastrophic scenario,” Quebec will be “at the table” of creditors to recover the hundreds of millions of dollars of public funds invested in Northvolt, Minister Fréchette assured Wednesday.

“Quebec would be able to recover a good part of its investment,” she declared in a debate Wednesday afternoon in the National Assembly.

Conversely, the official opposition argued that the Quebec state would come after the priority creditors and lose its stake.

“Our financial structure is very rigorous and limits the level of risk as much as possible,” said Mr.^me Fréchette in a debate Wednesday afternoon.

Quebec has already granted $240 million for the purchase of the land, which remains as collateral, in addition to $270 million invested in financing the parent company in Sweden, and $200 million from the Caisse de dépôt et placement (CDPQ). In addition, another $300 million should be paid in debentures, that is, an unsecured long-term loan, but under certain conditions.

“The choice to use a convertible debenture is prudent,” the minister argued.

“In the event of a disaster scenario where Northvolt defaults, our debenture would place us in a preferred position over shareholders to recover the company’s assets along with other creditors of equal rank. We would therefore be at the table in the event of such a situation.”

PQ MP Pascal Paradis, who is demanding that the details of the debenture be made public, maintains that this does not make Quebec a priority creditor.

“It’s not in the dressing rooms, it’s very far away in the balconies,” he said, like in a concert hall.

“It’s really a bad omen,” lamented Liberal finance critic Frédéric Beauchemin.

He says the ongoing restructuring at Northvolt is alarming lenders who are starting to monitor what is happening more closely.

In the event of default, the group that controls the company’s financing “will pay itself first, and the ‘juniors’ like Quebec will be subordinated,” he worries.

As for the debenture, “it is the last of Northvolt’s loan papers that will be repaid: if ever one day it was necessary to go through this procedure, it is certain that the capital will have disappeared.”

During question period, Mr. Beauchemin repeatedly questioned the Minister of Finance, Eric Girard, to find out what the current value of Quebec’s investment in Northvolt is.

“In the decree, he himself endorsed the investment of 270 million, he recommended it, and now we should trust them, when they are not able to tell us how much it is worth and blindly invest another 300 million?”

It was the Minister of the Economy, Christine Fréchette, who responded, but without giving any precise estimates.

She acknowledged that “there is a slowdown” in the electric vehicle sector, but assured that her approach was “cautious.” […]reasonable and sophisticated.”

“We want to see this debenture, we want transparency,” demanded Pascal Paradis.

“It’s not a controlled investment,” he continued. “No, Quebecers’ money is not guaranteed.”

He quoted the comments of the president of Investissement Québec, Bicha Ngo, who suggested that Quebec would not be a priority creditor.

Mr. Paradis recalled that no fewer than 18 investors were in the running, including Volkswagen, Goldman Sachs and a Swedish bank, at the time Quebec announced its debenture.

“We claim that we are a priority while the CEO of Investissement Québec says the opposite. We don’t believe it.”

Let us recall that in total, Quebec and Ottawa must each invest 1.37 billion on the 7 billion project. The federal government has not yet paid a cent, while Quebec and the Caisse have already disbursed 700 million.