Northvolt's bankruptcy filing won't affect Quebec battery plant, says economy minister

Quebec Economy Minister Christine Fréchette is reassuring the province following the announcement that Northvolt, the Swedish battery manufacturer, has filed for bankruptcy protection.

Speaking during a news conference Thursday, Fréchette said the filing will not affect the company's major project in Quebec's Montérégie region, where it plans to build a massive, $7-billion electric vehicle battery plant.

"Today's news does not concern the Quebec project," she said. "It is the parent company in Sweden that is being placed under protection."

Operations are continuing as planned at the McMasterville site, and Northvolt's financial position is secure for at least 18 months, she said. Northvolt has already invested more than $100 million in the site.

Quebec's largest risk is the $170 million it invested in the parent company, Fréchette said, but she expressed confidence in Northvolt's future, saying the bankruptcy process will allow the Swedish parent company to restructure and stabilize its operations.

Pascal Paradis, the spokesperson for the Parti Québécois on energy matters, said Quebec took a significant gamble with Quebecers' money by investing in Northvolt, adding that a failure of the parent company's restructuring would have impacts on its future in Quebec.

However, one Quebec expert agrees with Fréchette's optimism. 

"We may expect a more agile, more nimble Northvolt and one with a better chance of success," said Yan Cimon, professor of strategy at the Université Laval faculty of business administration.

He said the bankruptcy process will give the company breathing room so they can make the business more sustainable over time. It's still a young company in a dynamic industry up against serious competitors, he said, and there are bound to be hiccups along the way. 

Bankruptcy could affect the scale of Quebec operations, but the demand for batteries is only going to grow, he said, so there is "hope on the horizon for them."

In a statement released Thursday, Northvolt explained that filing for bankruptcy is a voluntary decision as part of an effort to restructure its debt and adapt its operations to meet client needs.

The company also assured that this decision will not affect its operations worldwide, including the Northvolt Six plant in Quebec.

"Northvolt Six is an essential component of the company's future, and we remain fully committed to bringing it to fruition," said Paolo Cerruti, CEO of Northvolt North America, in a statement. "We look forward to continuing to work with all stakeholders to make this project a success."

The company also assured that it will continue delivering to its clients, fulfilling obligations to essential suppliers and paying employee wages during the restructuring.

"Northvolt will continue to operate as usual during the reorganization, much like other international companies that have used the Chapter 11 process to restructure their financial obligations," the company said in its statement.

According to management, the Chapter 11 filing will allow the company to access $145 million in cash collateral to reorganize its operations. The battery manufacturer also secured an additional $100 million from its investors.

On Wednesday, Radio-Canada reported internal discussions had been underway at Northvolt for several days regarding the use of Chapter 11 bankruptcy protection under U.S. law to shield the financially struggling company.

Facing rapid growth and a lack of liquidity, Northvolt presented a strategic review plan in September, which included cancelling a factory project in Sweden, streamlining operations in Poland and California and cutting 1,600 jobs in Sweden.

The European battery giant cited slower-than-expected growth in the vehicle battery market and fierce competition, particularly from Asia.

The main shareholders of Northvolt are Volkswagen (21 per cent ownership), Goldman Sachs (19 per cent), and Vargas Holding (seven per cent).

The Caisse de dépôt et placement du Québec, the province's public pension fund manager, has also invested $200 million in the company.