Unraveling the Northvolt Saga: Questions Rise over State's Support Amid Financial Turmoil
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Emphasis on Government's Granted Subsidy to Northvolt - Opponents express worries over the Northvolt endeavor
The SPD is firing shots at the state government, alleging negligence in the promotion of Northvolt's battery factory in Heide. As economist Kianusch Stender of dpa puts it, "We can't rush a billion-dollar project like Northvolt, accuracy over speed should be the mantra." The coalition is accused of being overly hasty in funding the project.
Economy Minister Claus Ruhe Madsen (CDU) counters these claims, asserting that a study by consulting firm PwC on the project's potential, risks, and default probability of the convertible bond has been commissioned by the federal government. The state, as a guarantor for half of the bond, has participated in this review but also carried out its independent assessments.
"The evidence shows that the state government has meticulously weighed the chances and risks. After careful consideration, the state government concluded that the potential of the project outweighed the risks. Consequently, they proposed to the parliament to sanction the guarantee for the convertible bond," stated Madsen. The committee deliberated over the project in over 30 meetings and ultimately approved it unanimously on January 25, 2024.
SPD Criticism
The opposition's criticism stems from the release of documents from the state government in May 2023 regarding a questionnaire concerning the PwC study. From the partially redacted internal correspondence within the state government, it appears that there was a strong desire for written responses from the affected ministries, and there was a sense of urgency.
In an email from the Economy Ministry on May 15, 2023, it is mentioned, among other things, "...and I would also like to have the tight time frame specified in more detail, although this means, very exaggeratedly speaking, 'smile and wave through' for us, since we are rather 'chasing after' the information." In another email on the same day, the author or authors express, "In the end, only the current risks and information gaps can be noted, and it remains a decision of the department heads or the HH legislature (the budget legislature - note by editor). Unless the next few days bring some insights that render the risk manageable."
Northvolt's Financial Tangle
Northvolt aims to produce battery cells for up to one million electric cars per year in Heide but has been grappling with financial woes for quite some time. The company filed for bankruptcy protection (Chapter 11 of US insolvency law) in the United States in November. In March, the company also filed for insolvency in Sweden.
The financial turmoil could result in hefty costs for the federal government and the state of Schleswig-Holstein. Northvolt has received around 600 million euros from the state-owned development bank KfW, with the federal government and the state each underwriting half. A convertible bond is a corporate bond that grants the holder the additional right to swap these securities for shares within a specified period. The request for document access in this case, initiated by the SPD and FDP, stems from the central question of whether the state government withheld critical information from the Kiel parliament before agreeing to the guarantee, potentially acting recklessly with the associated risks.
Additional Insights [Optional]
Northvolt's Continuing Struggles
Since filing for bankruptcy, Northvolt has secured new funding to keep its operations running. However, the company still faces significant challenges, including a restructuring process and addressing the root causes of its financial troubles [6].
Repercussions for Stakeholders
Northvolt's bankruptcy has far-reaching implications for numerous stakeholders, including Novo Energy, which has been compelled to slash its workforce by 50% due to the loss of Northvolt's technological support [4]. The housing market in Skellefteå, Sweden, has seen a spike in apartment terminations and freeze on new constructions as a result of the crisis [5]. Moreover, the crisis underscores challenges in Europe's battery production ambitions and the vulnerability of companies reliant on external partners like Northvolt [4].
- The SPD and FDP have raised concerns about the state government's decision to grant a guarantee for Northvolt's convertible bond, questioning whether critical information was withheld from the Kiel parliament before the approval.
- As Northvolt grapples with financial challenges, including bankruptcy filings in the US and Sweden, the potential costs for the federal government and the state of Schleswig-Holstein increase, raising questions about the wisdom of investing in vocational training programs and similar initiatives within the community, given the current political and economic climate.
