The Swedish battery maker Northvolt AB, once a rising star in Europe’s green tech scene, has found itself at the center of a historic rise in Swedish bankruptcies.
A record 821 companies declared bankruptcy in October, well above the monthly average of 576 over the past decade, according to data from credit reference agency Creditsafe.
Northvolt’s troubled Skelleftea expansion project, which recently went insolvent, has significantly contributed to this spike.
“Several large bankruptcies are linked to the crisis at Northvolt,” Creditsafe said in a statement.
Konsultmäklaren Vakanta, with a turnover of 189 million, was October’s largest bankruptcy and Northvolt was a major customer and a contributing cause of the bankruptcy, the agency said.
Besides, it added that at least three large car dealers went bankrupt in October – Fordon City Sweden, Bilvörsäljning in Haninge, and Bilvörsäljning in Knivsta.
The ripple effect
Northvolt’s main expansion project, managed by its unit Ett Expansion AB, which had a turnover of 140 million, filed for bankruptcy last month, impacting suppliers with outstanding claims totaling 606 million kronor ($56.8 million).
The announcement came shortly after Northvolt’s decision in September to lay off 1,600 employees, including 1,000 positions at its Skelleftea plant, as part of urgent cost-cutting measures.
“We’re moving toward a grim total for 2024, as we have already passed the total from 2023,” Creditsafe Chief Executive Officer Henrik Jacobsson said. “Plenty of companies are still fighting for their survival.”
Apart from this, Denmark’s largest pension fund, ATP, has reduced the value of its $6 billion unlisted assets portfolio due to its investment in the struggling battery maker, Bloomberg reported.
ATP, which owns a 5% stake in Northvolt and has invested 2.3 billion kroner ($335 million), reported “extraordinary writedowns in private equity” in its third-quarter results on Wednesday.
These adjustments mainly reflect the Northvolt stake but may also include other investments in the unlisted portfolio, sources said.
The rapid rise of Northvolt since its founding in 2016 was fueled by its ambitious goal to produce the “world’s greenest battery.”
This vision attracted billions in investments and orders from automakers including Volkswagen (ETR:VOWG_p), BMW, and Volvo.
However, as Europe’s electric vehicle (EV) market faces a slowdown, Northvolt’s growth plans are now under significant strain.
BMW canceled a $2.2 billion contract with Northvolt in June, exemplifying the market’s cooling enthusiasm for EVs.
A bailout in sight?
Northvolt is close to securing a $300 million rescue package to stabilize its finances, Bloomberg News reported recently.
Led by Goldman Sachs (NYSE:GS), a group of investors offering Northvolt a bridge loan is seeking shares in its Canadian subsidiary as collateral.
To proceed, they need approval from Quebec’s financial arm, Investissement Quebec, as it holds a senior secured loan of C$240 million ($174 million) on the land for Northvolt’s battery plant project near Montreal.
The Canadian and Quebec governments have committed significant support to the project, with Quebec pledging C$1.37 billion ($991 million), a portion of which is already disbursed.
In the event of Northvolt’s bankruptcy, Quebec would have priority on repayment for its senior loan, followed by other investors.
A Northvolt spokesperson noted positive progress in funding talks, expressing optimism about finalizing the deal.
Investissement Quebec also holds a C$270 million unsecured convertible loan with Northvolt’s Swedish parent company.