Northvolt says it will proceed with $7bn battery plant in Canada despite bankruptcy in US

The company is planning to build a facility producing battery cells for electric vehicles, called Northvolt Six, 25 kilometres east of Montreal, Quebec.

Northvolt said it could continue in Canada and Germany because its subsidiaries in those countries are not part of bankruptcy proceedings and will continue to operate as normal.

But a Canadian government told Reuters that it did not expect Quebec or the federal government would give any more money to the company.

Northvolt announced that it would invest CAN$7 billion in a Canadian plant last year (2023) and the Canadian government and Quebec provincial government each pledged to contribute CAN$1 billion (US$700 million) for the first phase of construction.

But in a Chapter 11 petition filed at a court in Houston, Texas, US, Northvolt said its liquidity there “has become dire”, as it struggles under around $5.8 billion in debt.

Entering bankruptcy protection would allow the company to secure US$145 million in cash, while one of Northvolt’s existing backers has agreed to provide $100 million in new financing to support the company’s operations in the form of debtor-in-possession financing, the company said.

Northvolt Ett, the company’s flagship battery gigafactory in Skellefteå, Sweden, and Northvolt Labs in Västerås, Sweden will remain operational.

Northvolt had previously announced in September this year that it was cutting 1,600 jobs amid slowing demand for electric vehicles.

The company, which had been viewed as one of the strongest prospects for reducing western car manufacturers’ reliance on Chinese firms, now aims to restructure by the first quarter of 2025.

Commenting on the Chapter 11 filing, Tom Johnstone, interim chairman of Northvolt’s board, said, “This decisive step will allow Northvolt to continue its mission to establish a homegrown, European industrial base for battery production. Despite near-term challenges, this action to strengthen our capital structure will allow us to capture the continued market demand for vehicle electrification. We are likewise pleased by the strong support we have received from our existing lenders and our customers.”