Whirl with me back in time all the way to September 2023, when the federal and Quebec governments announced that they would be partnering with Swedish battery maker Northvolt to plunge headlong into the bright green future. Canada and Quebec would be laying out about $2.7 billion in capital, and more in downstream subsidies, to facilitate the construction of a vast, hypermodern battery plant in the province’s hinterland to help meet the world’s unlimited appetite for electric vehicles, creating thousands of jobs and contributing to global environmental health. “It’s a win-win-win — for workers, for communities and for the environment,” trumpeted the prime minister. What could go wrong?
Ominous signs began to appear in September of this year, as the Financial Post and this newsletter remarked, while politicians offered reassurance. Northvolt’s balance sheet had turned out to be crawling with tulipomaniac investments and discouraged customers, and the political will behind Europe’s fast-forward transition away from internal combustion vehicles was beginning to sag. Soon, amid news of bailout talks among owners and creditors of Northvolt, the company slowed construction timelines on a heavily subsidized German factory like the one now being assembled in Quebec. This added to political problems for a German coalition government that has since gone kablooie.
Bargaining over a private cash injection for Northvolt has now entered a murky phase, fraught with “complexity of negotiations between multiple parties and uncertainty about the market for electric cars that Northvolt supplies.” There are signs of tension between Northvolt and Germany’s Volkswagen, which owns about a fifth of the Swedish consortium and was eager to support the creation of a European EV battery champion. Meanwhile, Swedish truck maker Scania, a crucial Northvolt customer, appears to be unwinding a pledge to source all its electric truck batteries from its compatriot firm. The Swedish state, with rock-solid backing from the political opposition, continues to refuse help.
On Saturday, as financing talks continued, the Financial Times broke news that Northvolt is considering filing for Chapter 11 bankruptcy in the United States and that one major investor has already written the value of the company down to zero. Reuters added insult to injury Monday with an exclusive on Northvolt’s chronic failures to meet internal production targets. The good news is that the federal government’s subsidies to the factory were contingent on the factory coming onstream, which was originally supposed to happen in late 2026, and Quebec has only paid out about a third or so of the $1.4 billion it promised.
The bad news, as the Globe and Mail reported Tuesday morning, is that Ontario pension plans and Quebec’s Caisse de dépôt have a lot of capital tied up in Northvolt — nobody’s saying exactly how much — and there is little certainty about where those investors stand in the event of a bankruptcy filing. The Quebec factory is itself undergoing “strategic review” by Northvolt management, and of course might end up still being finished, on some timeline, by some owner or other. But Trudeau’s “win-win-win” is definitely looking shaky for all three of the enchanted victors from long-ago 2023, when nobody could possibly have seen any of this chaos coming.
— Colby Cosh
