Battery production: Northvolt crisis: Millions at stake for the federal and state governments

The financial crisis of the Swedish battery manufacturer Northvolt could cost the federal government and the state of Schleswig-Holstein dearly. The ailing company, which is building a factory near Heide, had applied for restructuring proceedings under US insolvency law.

This means that around 600 million euros are at stake, which Northvolt received from the state development bank KfW and for which the federal government and the state each guarantee half. The Federal Ministry of Economics said that it cannot currently be determined whether the federal government actually suffered any damage. The “Bild” newspaper first reported on the matter.

Northvolt had applied for Chapter 11 protection from creditors in the USA. The aim of the procedure under US insolvency law is restructuring and continuation. The German project company, which is building a battery factory in Heide (Dithmarschen district), is not part of the process.

Northvolt can initially continue to operate its business under the supervision of a bankruptcy judge. However, claims from donors have been put on hold for the time being and with them millions from the federal and state governments.

Convertible bond already paid out

The deferred claims include a so-called convertible bond worth 600 million euros that KfW subscribed to Northvolt AB. The capital was provided by KfW and, according to the information, fully passed on to the German subsidiary. The use of the funds is strictly tied to the implementation of the construction of the factory in Heide; the parent company has no access to them, the ministry emphasized.

With the Chapter 11 proceedings, Northvolt AB is currently not allowed to pay convertible promissory notes that have become due. KfW cannot therefore expect to get the money back from Northvolt for the time being. That’s why the federal government is now stepping in. But there are also “additional costs”.

The demand still exists, but is currently not enforceable, according to the Ministry of Economic Affairs. The federal government will therefore reimburse KfW for the value of the bond plus additional costs in December. Schleswig-Holstein has provided a counter-guarantee of 300 million euros for the convertible bond and will reimburse the federal government.

Outcome of the restructuring process uncertain

There is a chance that Northvolt will pay back the 600 million euros plus additional costs. However, a successful restructuring process would be a prerequisite.

The Federal Ministry of Economics emphasized that the claim against Northvolt remained unchanged. After the Chapter 11 proceedings have been completed, returns are possible again. KfW would pass this on to the federal government. It was said that no final statement could be made about the outcome of the Chapter 11 proceedings and the value of any claims.

Northvolt has long been considered a great hope for the European automotive industry when it comes to battery production for electric cars. The company’s largest shareholder is the German car manufacturer Volkswagen. The owners also include the US investment bank Goldman Sachs and BMW.