According to Bloomberg on October 28, the financially troubled Swedish battery manufacturer Northvolt AB is expected to complete a short-term financing round of approximately $300 million soon.
The media reports that this financing, which could be completed as early as this week or slightly later, is still in the final stages due to the complex documentation involving customers, investors, and lenders. An anonymous source familiar with the matter disclosed that while the rescue funding for Northvolt is progressing, the timeline for completing the new package may still change.
Earlier last month, Bloomberg cited sources familiar with the matter, stating that Northvolt was nearing rescue funding that includes both debt and equity financing. This infusion of funds would buy time for the cash-strapped manufacturer to stabilize production and line up long-term financing.
The complexity of the company's debt financing is highlighted by the involvement of 23 commercial banks, the European Investment Bank, and the Nordic Investment Bank in the company's $5 billion green loan in January 2024.
Northvolt's largest shareholder, Volkswagen AG, is lending a helping hand. In a bid to support the struggling battery manufacturer, Volkswagen AG's truck manufacturing brand, Scania CV AB, announced last Monday its plan to equip all its future electric trucks with Northvolt batteries, without disclosing any financial details.
Undoubtedly, Northvolt is facing production hell. Earlier this year, the CEO refused to disclose when Northvolt's battery factory in Skellefteå, near the Arctic Circle, would reach full production capacity. The facility is said to be currently operating at only 5% to 10% of its total capacity.
On September 23, Northvolt officially released its business contraction and layoff plans, deciding to suspend the expansion project of Northvolt Ett in Skellefteå and limiting its core business to achieving the initially planned 16 GWh battery capacity. Subsequently, on October 8, the subsidiary responsible for the battery expansion project, Northvolt Ett Expansion AB, filed for bankruptcy with the Stockholm District Court.
Since the start of production at the end of 2022, the Northvolt Ett battery factory has suffered from low yields and slow production ramp-up, which directly led to BMW, a shareholder of Northvolt, canceling a billion-dollar order contract in May of this year. It is said that this was a subsidiary where Audi and BMW's production was bundled together, which means Audi also withdrew its order from Northvolt.
As Northvolt is in financial distress and is working on a $300 million rescue financing, Volvo notified Northvolt last Thursday of its intention to exercise its buy-back right to acquire Northvolt's shares in their joint venture, Novo Energy. In a statement released on October 30, Volvo said, "This action follows a breach of the parties' shareholders' agreement where Northvolt AB has not fulfilled its financing obligations."
The joint venture battery company, established in 2022, originally planned to produce batteries for Volvo and other potential brands of the company's electric vehicles. In September 2023, the joint venture battery factory in Gothenburg, Sweden, began construction, with a designed annual production capacity of up to 50 GWh, originally scheduled to start production in 2026. Currently, as Volvo's announcement now suggests, Northvolt has been unable to make all the agreed payments or investments to the battery joint venture.
According to Volvo's announcement, the NOVO Energy building could be multifunctional, and various options are now being considered "on the assumption that Volvo Cars reaches full ownership." Moreover, Volvo may not engage in battery manufacturing independently, as any battery production at NOVO Energy is “dependent on third-party or other partner involvement."
Volvo Cars also stated that it has a diversified and resilient battery supply chain, and its vehicle roll-out plans will not be affected. Volvo Cars intends to have a constructive dialogue with Northvolt on the matter.
