Workers walk at the site of the Northvolt Ett factory in Skelleftea, north Sweden on Feb. 23, 2022.JONATHAN NACKSTRAND/AFP/Getty Images
Several Canadian pension funds have sizable financial exposure in the event of a bankruptcy filing by Northvolt AB, the Swedish battery maker that is burning through cash as growth in demand for electric vehicles lags expectations.
Canada Pension Plan Investment Board, Investment Management Corp. of Ontario (IMCO), Ontario Municipal Employees Retirement System and Caisse de dépôt et placement du Québec participated in US$2.3-billion in convertible debt financings for Stockholm-based Northvolt, joining major automakers and financial institutions to support the European battery hope as its future looked bright. OMERS also bought an undisclosed number of Northvolt shares in 2021.
The Financial Times reported on Sunday that Northvolt is considering seeking protection from creditors in the coming days after talks about a rescue package collapsed. The company is still trying to secure short-term financing, but time is getting short, the FT said, quoting unnamed people involved in the negotiations.
Northvolt has suffered this year as EV demand growth slowed and a US$2.15-billion battery order was cancelled. In recent months, it has cut a fifth of its staff and shelved many of its expansion plans. Meanwhile, the fate of a $7-billion factory planned for Quebec has yet to be decided.
Northvolt said little about its current predicament when contacted by The Globe and Mail on Monday. “Financing negotiations are ongoing,” Northvolt spokesperson Emmanuelle Rouillard-Moreau said in an e-mail. “We are maintaining close communication with our investors and key partners. We will share updates and the outcome of these discussions once decisions have been finalized.”
The terms of Northvolt’s convertible debt – including under what circumstances it would be swapped for equity – have not been disclosed, which makes it hard to gauge where the four Canadian pension funds rank in terms of seniority in the event of a bankruptcy, or how much of their initial investments are at risk of being wiped out. Lenders typically rank ahead of equity owners when a company is restructured.
Northvolt’s ownership group also includes some of the biggest automotive and financial names, such as Volkswagen AG VWAGY, Bayerische Motoren Werke AG and Goldman Sachs. The latter was said to be leading ill-fated rescue-package talks that were aimed at securing a reported US$300-million.
The total exposure among the Canadian pension funds is murky, making it difficult to glean the precise values of the funds’ investments from public disclosures. The four pension-fund managers participated in a series of debt issues in 2023, including a US$400-million investment from IMCO. CPPIB invested US$55-million, while OMERS and BlackRock Inc., which is the world’s largest asset manager, also participated as Northvolt expanded its existing US$1.1-billion convertible debt program to US$2.3-billion.
In November, 2023, the Caisse took on US$150-million in convertible debt.
OMERS was an earlier backer of the battery maker and has made three investments, starting with the purchase of an undisclosed stake in a US$2.75-billion private placement of equity alongside a host of other investors, including Swedish pension funds, Goldman Sachs and Volkswagen. OMERS has not disclosed the size of its equity position.
Spokespeople for OMERS, CPPIB, IMCO and the Caisse all declined to comment beyond confirming investments that were publicly announced.
In September, Northvolt announced it was cutting its Swedish work force by 1,600 and suspending a number of its expansion projects. It retreated from its growth strategy as automakers such as General Motors Co. GM-N, Ford Motor Co. F-N, Volvo Car AB VOLVF and Volkswagen tempered their EV outlooks and spending to deal with high capital costs and some resistance among car buyers, who face sticker shock and still-spotty charging infrastructure. In June, BMW cancelled a US$2.15-billion order for Northvolt battery cells.
All of this turmoil has raised questions about the Quebec plant, which has been awarded billions of dollars in loans and production incentives from the federal and Quebec governments. Northvolt has said that it is conducting a strategic review of the facility in Saint-Basile-le-Grand, Que., and results are expected in the coming weeks.