Northvolt Ett factory. Credit: Northvolt

Northvolt Secures $5 Billion in Financing For Circular Battery Factory

January 18, 202411 months ago Steve Hanley 0 Comments

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Europe has a dearth of locally owned battery manufacturers. There are plenty of battery factories in operation or being planned by Chinese and South Korean companies but only one home grown battery maker — Northvolt, which was started in 2016 by two former Tesla battery engineers, Peter Carlsson and Paolo Ceruti.

Northvolt has a goal of manufacturing the most sustainable batteries in the world, which is a primary reason why it recently chose Quebec, Canada as the site of its first battery factory in North America. Quebec has abundant supplies of hydroelectric power, which means the electricity needed to operate the factory will be nearly 100% emissions free.

Northvolt Secures $5 Billion Financing Deal

The lack of local battery manufacturing in Europe was key to Northvolt obtaining a $5 billion green loan from European sources to expand the Northvolt Ett factory in Skellefteå, Sweden, near the Arctic Circle. The Ett factory is doing something other than making batteries. Next door is Revolt Ett, which is focused on reclaiming critical battery materials from existing batteries that are no longer serviceable so they can be reused to make new batteries.

In a press release, Northvolt said the Revolt Ett facility is approaching the end of the commissioning process and is beginning to produce its first recycled battery materials. The facility recovers battery-grade metals with a carbon footprint 70% lower than mined raw materials, thereby enabling a fully integrated, circular battery production setup that has not previously existed outside of Asia.

Peter Carlsson said, “This financing is a milestone for the European energy transition. It will enable us to realize the full potential of Northvolt Ett and demonstrates that circular, sustainable business practices are fundamental to success in today’s industry.”

The new debt includes refinancing of the $1.6 billion debt package raised in July 2020, and has been raised on the back of long term contracts amounting to over $55 billion with partners including BMW, Scania, Volvo Cars, and Volkswagen Group. It was made possible by a group of 23 commercial banks, as well as the European Investment Bank (EIB) and the Nordic Investment Bank (NIB), who are both supported by the European Commission’s InvestEU program.

A significant portion of the commercial facilities are covered with certain guarantees combined with direct funding, provided by The Swedish National Debt Office, Euler Hermes, the Export-Import Bank of Korea (KEXIM), Nippon Export and Investment Insurance (NEXI) and the Korea Trade Insurance Corporation (K-Sure).

Alexander Hartman, CFO of Northvolt, said, “This has been an incredible team effort, involving long due diligence processes, new partnerships with strong institutions, and developing cutting edge financing structures focused on sustainability — all to close one of the largest green financing deals in history.”

This is the first loan raised through Northvolt’s Green Finance Framework created in 2023. Reflecting the company’s commitment to sustainability and the circular economy, Northvolt received the highest ‘dark green’ rating attainable for its framework from the external rating company CICERO — the first industrial company in its sector to do so.

Emma Nehrenheim, chief environmental officer at Northvolt, added, “I’m proud to see how our ambition to mass produce the world’s greenest battery attracts top tier financial partners as global capital is looking to invest in electrification and climate change mitigation. It has become obvious that the creation of a new industry standard not only attracts world-leading talent, but also major financial institutions that aim to align their strategy with long term macro trends.”

This financing package means that Northvolt has now secured more than $13 billion in equity and debt to enable its expansion in Europe and North America, with the facilities Northvolt Ett in Skellefteå, Sweden, Northvolt Dwa in Gdansk, Poland, Northvolt Drei in Heide, Germany, Northvolt–Volvo Cars joint venture gigafactory ‘NOVO’ in Gothenburg, Sweden, Northvolt Fem in Borlänge, Sweden, Northvolt Cuberg in San Leandro, USA, and the recently announced Northvolt Six in Montreal, Canada.

Northvolt Sodium Ion Batteries

Northvolt is active in areas other than making batteries for electric vehicles. Recently it announced the start of production for sodium ion battery cells, which are intended for use in grid scale battery storage installations. There have been some issues lately with fires in some of those facilities. Sodium ion batteries have a lower risk of fire than lithium ion batteries.

But sodium ion batteries also have a lower energy density, which means they need more room than lithium ion batteries for an equivalent amount of energy storage capability. Space is in critically short supply in the chassis of an electric vehicle but is not such a major consideration in grid scale battery storage installations.

There’s another advantage for sodium ion batteries. Sodium is abundant and cheap. China has a virtual monopoly on the materials needed to make lithium ion batteries. Focusing on sodium ion technology cuts Chinese companies out of the supply chain entirely and promotes domestic suppliers instead. That not only gives manufacturers outside of China more control over their supply chain and the prices they pay for materials, it also calms the fears of national governments who worry their manufacturing base may be subject to the whims of a foreign power. (See “Taiwan” for more on that topic.)

Northvolt is also involved in the production of lithium metal batteries with Cuberg. Those batteries have significantly higher energy density than most lithium ion batteries. Cuberg currently makes batteries with an energy density of 380 Wh/kg — 40% more than traditional lithium ion batteries. Cuberg is primarily focused on making batteries for electric aircraft.

Regulators require robust fire suppression systems be in place before approving any new technologies for aircraft. Combine low energy density with the weight of those fire suppression systems and you have aircraft that struggle to get off the ground even without passengers or cargo aboard. Cuberg is targeting the development of batteries with up to 500 Wh/kg energy density for the nascent electric aircraft industry.

The Takeaway

Add it all up and you have a European battery manufacture with a global reach that is focused on batteries for vehicles, energy storage, and aircraft while pushing battery recycling technology forward at the same time. So how can you buy stock in the company? The answer is, you can’t. Peter Carlsson tells Bloomberg, Northvolt has no immediate plans to launch an initial public offering. “At this point in time it’s still a fairly closed market for IPOs,” Carlsson said in an interview. “We need to ensure that we have a sufficient runway for when the market opens and that’s what we continue to work on.”

Those of us who are mere scribes don’t have the acumen to understand the complexities of taking a company public, but if Northvolt ever decides to go in that direction, we want to be an early investor in a company that seems to have virtually unlimited upside potential.