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

Quebec's Economy Minister, Christine Fréchette, sought to reassure the public following Northvolt's announcement that the Swedish battery manufacturer has filed for bankruptcy protection. Speaking at a press conference on Thursday, Fréchette clarified that this filing will not affect the company's significant project in Quebec's Montérégie region, where a $7-billion electric vehicle battery plant is under development.

"Today's news does not concern the Quebec project," she stated. "It is the parent company in Sweden that is seeking protection."

Fréchette emphasized that operations at the McMasterville site are continuing as planned, and Northvolt’s financial position is secure for at least 18 months, noting that the company has already invested over $100 million into the project.

The main risk for Quebec, she said, is the $170 million invested in the parent company. However, she expressed confidence in Northvolt’s future, suggesting that the bankruptcy process will allow the Swedish parent to restructure and stabilize its operations.

Pascal Paradis, energy spokesperson for the Parti Québécois, criticized the provincial investment, calling it a significant gamble with public funds. He warned that if the restructuring fails, it could have repercussions for the company’s future in Quebec.

Despite these concerns, some experts share Fréchette’s optimism. Yan Cimon, a strategy professor at Université Laval’s business faculty, believes the bankruptcy process could lead to a more agile and sustainable Northvolt. He acknowledged that the company, still young and navigating a competitive industry, will face challenges but sees potential for success in the long term.

Northvolt’s Quebec factory, set to mirror its Swedish ‘gigafactory,’ may see some changes in scale due to the bankruptcy, but Cimon noted that the growing demand for batteries offers hope for the company's future.

In a statement released Thursday, Northvolt explained that the bankruptcy filing is a voluntary step as part of a debt restructuring process aimed at adapting its operations to better serve clients. The company assured that this move will not impact its global operations, 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. He added that the company will continue to work with all stakeholders to ensure the success of the project.

Northvolt also confirmed that it would fulfill its obligations to suppliers and employees during the restructuring, and would continue its usual operations throughout the reorganization process.

By filing for Chapter 11 protection, the company will gain access to $145 million in cash collateral to aid in its restructuring, along with an additional $100 million secured from investors.

The filing follows a period of internal discussions, with Radio-Canada reporting that Northvolt had been considering Chapter 11 protection to manage its financial struggles. Facing rapid growth and liquidity issues, the company presented a strategic plan in September that included halting a Swedish factory project, streamlining operations in Poland and California, and cutting 1,600 jobs in Sweden. Northvolt attributed these moves to slower-than-expected growth in the vehicle battery market and heightened competition, particularly from Asia.

The company’s major shareholders include Volkswagen (21%), Goldman Sachs (19%), and Vargas Holding (7%). Quebec’s public pension fund, Caisse de dépôt et placement du Québec, has also invested $200 million in Northvolt.