Employees work at a machine inside the Northvolt facility in Vasteras, Sweden, on Sept. 29, 2021.Helena Soderpalm/Reuters
Northvolt AB, the struggling European battery maker, has filed for bankruptcy protection in the United States, and said a $7-billion factory under construction in Quebec has been postponed.
Stockholm-based Northvolt, which counts four major Canadian pension plans among its lenders, said in court documents filed on Thursday its “liquidity picture has become dire,” with US$5.84-billion in debt, but just US$30-million in cash on its books,
The company said the Chapter 11 filing will allow it to meet obligations to customers and suppliers and access new sources of funding. That includes US$145-million in cash collateral and US$100-million in debtor-in-possession financing from one of its customers.
“Despite near-term challenges, this action to strengthen our capital structure will allow us to capture the continued market demand for vehicle electrification,” Northvolt chairman Tom Johnstone said in a statement. “We are likewise pleased by the strong support we have received from our existing lenders and our customers.”
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Northvolt, which had been touted as Europe’s big hope for the industry, has suffered this year as EV demand growth slowed and China remained a dominant force in batteries and their components. Meanwhile, BMW, which is both a customer and Northvolt co-owner, cancelled a US$2.15-billion battery order.
In recent months, Northvolt has cut a fifth of its staff and shelved many of its expansion plans. The financial turmoil raised concerns about the fate of a the factory planned for Quebec.
The company said in its court filing that the project, along with another in Germany, has been postponed, “though the well-funded and permitted projects remain important pieces of the company’s future strategy.”
It did not give a timeline for the postponement, but said the Quebec project, located in St-Basile-le-Grand, is financed separately and that construction would proceed. According to the filing, the project holds $240-million in cash.
“We will look forward to continuing to work with all our stakeholders to make this project a success, and executing on our plan for the construction of our site that will demonstrate diligence with the invested funds during the restructuring process of the Swedish parent company,” Paolo Cerruti, chief executive of the North American unit, said in a statement.
Northvolt’s German and North American units are not subject to the Chapter 11 process, which is now under way in Texas.
The parent company said Northvolt Ett, its main gigafactory in Skelleftea, Sweden, and Northvolt Labs in Vasteras, Sweden, will keep operating as the restructuring process unfolds.
The restructuring is expected to be completed in the first quarter of next year. Northvolt will study proposals for new investment from industrial and financial players, as well as its existing lenders, shareholders and customers, it said.
Last year, Canada Pension Plan Investment Board, Investment Management Corp. of Ontario, Ontario Municipal Employees Retirement System and Caisse de dépôt et placement du Québec participated in US$2.3-billion in convertible debt financings for Northvolt, joining several 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.
In corporate restructurings under court protection, lenders often have the value of the debt reduced, converted to equity or other terms adjusted so companies can emerge on stronger financial footing.
The terms of the Northvolt convertible debt have not been disclosed, and the pension funds declined to offer details or predictions of what they might face in the process.
Jean-Benoît Houde, spokesman for the Caisse, said the Quebec fund manager is in continuous communication with Northvolt, but declined to comment further, saying the case is before the court. Spokespeople from the other pension plans declined comment.
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Northvolt’s ownership group also includes such names as Volkswagen AG, Bayerische Motoren Werke AG and Goldman Sachs. The latter had earlier led ill-fated rescue-package talks that were aimed at securing a reported US$300-million.
With a report from James Bradshaw