Swedish battery company Northvolt’s bankruptcy filing could affect Canadian pension plans, even though its subsidiary’s C$7-billion electric vehicle battery plant in Quebec is still moving forward.
Quebec Economy Minister Christine Fréchette confirmed the bankruptcy filing will have no impact on the McMasterville project in the Montérégie region, reports CBC News. Northvolt has already invested over $100 million in the McMasterville site.
But some of Northvolt’s biggest investors stand to take a major hit from the bankruptcy. Four Canadian pension plans could also sustain losses, though the scale of their exposure is not clear, reports the Globe and Mail.
Founded in 2016, Northvolt promoted itself as a leader in European battery manufacturing, receiving backing from investors like Volkswagen, Goldman Sachs, AG, and four Canadian public pension funds—the Canada Pension Plan Investment Board, the Investment Management Corporation of Ontario, the Ontario Municipal Employees Retirement System, and the Caisse de dépôt et placement du Québec.
The company had planned new battery plants in Germany, Canada, and Sweden. However, its finances came under pressure when EV sales—and the associated demand for batteries—grew more slowly than expected. BloombergNEF’s 2024 Long-Term EV Outlook forecasts a 21% annual growth in EV sales over the next four years, but Northvolt had projected [pdf] a 99% growth rate between 2024 and 2026.
In June, BMW pulled out of a multi-billion dollar order after Northvolt was unable to meet the automaker’s 2026 battery needs. That marked the beginning of a “countdown,” writes the Financial Post, culminating with Northvolt’s Chapter 11 bankruptcy filing in November. Investors say Northvolt has not been transparent about its financial circumstances.
“A dilemma that these ambitious newcomers are facing is that from the get-go, they had to announce very large-scale plans in order to be attractive for financiers,” said Robert Heiler, senior manager at Porsche Consulting, a division of Volkswagen—Northvolt’s top investor. But it’s really difficult to scale up various operations “all at the same time.”
Northvolt laid off 1,600 people in Sweden, suspended a number of expansion projects, and saw CEO and co-founder Peter Carlsson step down. Now, the Globe writes, Northvolt is struggling to meet production targets and is faced with a liquidity crisis—the company has US$5.84 billion in debt but only $30 million in cash, equal to about one week of operating costs.
Northvolt said its German and Canadian operations are not part of the bankruptcy proceedings, so the planned battery plant in Quebec will not be affected. However, Canada’s federal government and the government of Quebec will not invest more in the company, writes Reuters.
Normand Mousseau, scientific director of the Trottier Energy Institute at Polytechnique Montréal, said events like the Northvolt bankruptcy are to be expected along the “bumpy road” of the energy transition. But he also warned that Canada’s battery industry will be vulnerable if it focuses too narrowly on manufacturing.
“Don’t forget that other battery manufacturers are going on in Canada,” Mousseau told CTV News.
“We are still part of the game, but in a passive way, because all the technology comes from outside,” he added. “We are just grounds and workers, but very little intellectual property, so we remain at risk at any change because nothing anchors these companies in Canada at the moment.”
