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Northvolt is filing for Chapter 11 bankruptcy after Europe’s best-funded start-up and main hope for countering Asian dominance in electric vehicle batteries failed to agree a last-minute rescue package with investors.
The Swedish group said on Thursday night that it was filing for Chapter 11 reorganisation in the US — an option for overseas companies that operate there — and would carry on operating as normal in the mean time.
“This decisive step will allow Northvolt to continue its mission to establish a homegrown, European industrial base for battery production,” said Tom Johnstone, Northvolt’s interim chair.
Northvolt was seen as crucial to Europe’s automotive industry and its best chance of fighting back against the likes of China’s CATL and BYD, Japan’s Panasonic, and South Korea’s LG and Samsung in EV battery production
But the Swedish group, which raised more than $15bn from investors such as Volkswagen, Goldman Sachs and BlackRock as well as the German and Canadian governments, has struggled to increase production at its one factory in Skellefteå in northern Sweden.
Northvolt said it would be able to access $145mn in cash and receive $100mn in new financing from one of its customers — truckmaker Scania — as part of the Chapter 11 process.
It added that its German and Canadian businesses, that are meant to build factories in each country, would continue to operate as normal because they were financed separately, including via subsidies from the respective governments of almost $4bn.
Northvolt, which said it expected the restructuring to be completed in the first quarter of next year, will aim to raise fresh capital from both strategic and financial investors.
“Throughout this process, we will focus on meeting our commitments to our stakeholders, including our employees, customers, suppliers and the governments of the countries in which we operate,” Johnstone said.
Current and former Northvolt employees have previously blamed problems from mismanagement and overspending to poor safety standards and heavy reliance on Chinese machinery for the group’s inability to expand production.
Its sub-Arctic factory had the capacity to make 16 gigawatt hours of batteries a year, enough to power about 270,000 cars, but last year produced less than 1 per cent of that, according to insiders.
Last year, an employee died in an explosion at the factory — Swedish prosecutors are preparing to serve it with a notice of “suspicion of gross manslaughter”. BMW, another shareholder, has also cancelled a $2bn contract because of the lack of battery production.
Northvolt’s plan, announced earlier this year, to raise as much as $7bn in fresh capital has been repeatedly scaled back, but it appeared close to agreeing a $300mn rescue package with investors this month before the deal collapsed.
It has spent recent days discussing options, which included declaring bankruptcy as well as seeking short-term financing, but decided to file for Chapter 11 in the US Bankruptcy Court for the Southern District of Texas.
Northvolt is being advised by Teneo, Kirkland & Ellis, A&O Shearman, and Mannheimer Swartling. Rothschild is running its marketing process.
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