Buyers Emerge For Northvolt
Swedish radio station SverigesRadio broke the news on June 25 that one or more interested buyers for the remaining assets of Northvolt have made themselves known to bankruptcy administrator Mikael Kubu. He said a foreign investor is interested in acquiring the entire bankruptcy estate, including the factory in Skellefteå and the development center in Västerås.
According to Kubu, negotiations are progressing. This initial, non-binding offer is expected to open the door to further negotiations. At the same time, Kubu said he expects to receive yet another expression of interest shortly. The identities of the interested parties have not yet been made public. “We now have an indicative bid on the table and hope for more indicative bids. At the same time, there are a number of conditions when it comes to such bids and these conditions must be possible to fulfill,” Kuba said in a statement. “We can probably say that we expect to receive another indicative bid during the day,” he added.
In a subsequent report, SverigesRadio claimed that several other companies have now expressed an interest in purchasing all or parts of Northvolt’s assets that are now in the hands of the bankruptcy administrator. One of them is understood to be Swedish truck manufacturer Scania, which is part of Volkswagen Group. Others have expressed an interest in purchasing the Northvolt development center in Västerås, CEO Christian Levin said. “The discussion is ongoing. We are among those who are prepared to invest the most in this, but we cannot and do not want to do it ourselves.”
But Scania is only one of several interested parties. On Tuesday, the bankruptcy trustee announced that an initial bid for Northvolt’s entire operations had been received from a foreign investor and that further bids were expected, which could lead to a battle over who gets to buy what.
Kubu said this is the first time since the bankruptcy was filed that an interested party has placed a bid for the all of the assets of Northvolt currently in his possession and that there are now a total of three possible buyers for the business. This increases the likelihood of a buyer taking over the entire Northvolt business has increased significantly — a hopeful sign Kubu said.
Negotiations are progressing, but many difficulties will need to be overcome before a final agreement is concluded. “Yes, it is moving forward. Then it is clear that there is limited time and the problem is that there are fewer and fewer employees and a buyer naturally does not only want to buy machines but also needs the right skills. It is still a race against time,” Kubu said. “A buyer would, of course, not only want to buy machines but would also need the appropriate staff on site.
The bankruptcy estate includes the main plant called Northvolt Ett in Skellefteå, where production will be stopped for the time being. It also includes the development center called Northvolt Labs in Västerås, for which the truck manufacturer Scania wanted to put together a consortium to rescue it. In addition, the planned battery factory in Heide, Schleswig-Holstein, is still being prepared for construction, thanks to subsidies. A Northvolt spokesperson told the press, “It shows that there is still great interest in the site in Heide.”
An Investor For Northvolt
According to Michael Kubu, this is the first time that an investor has shown interest in the entire Northvolt company and not just in individual components. The company has already disposed of a number of assets in the days leading up to the bankruptcy. Volvo Cars acquired all of Northvolt shares in the battery cell joint venture Novo Energy, Scania acquired the battery module production facility in Gdansk, Poland, as well as a research and development centre in Tomteboda near Stockholm. Both were owned by Northvolt Systems Industrial. US battery developer Lyten has taken over the Californian battery production facilities of Cuberg, a subsidiary of Northvolt.
Kubu declined to share details about which companies had submitted offers recently, saying only that all three were not from Sweden. Kubu did not specify whether any were even based in Europe. According to Swedish news organization SVT, it is unlikely a Chinese buyer would be acceptable to Sweden, as the supervisory authority for strategic products (ISP) has said no to Chinese interests owning similar commercial enterprises.
SVT did say that, according to documents from the Stockholm District Court, Northvolt’s debts amount to well over 80 billion kronor — equivalent to more than 7.2 billion euros. At the same time, the assets of Northvolt AB and Northvolt Ett, the main plant in Skellefteå, are estimated at just over two billion kronor, or 180 million euros. Sales in bankruptcy seldom result in deals that reflect full retail value, so it seems safe to assume Northvolt creditors will get a significant haircut when their claims are settled.
The Northvolt bankruptcy was a painful blow to Europe’s pride. As Michael Barnard pointed out recently, the European Union lost a couple billion euros from loans and grants that went bust when the company filed for bankruptcy. It also lost the prospect of a supply of Europe-made batteries. But the biggest loss for the EU, Barnard said, was the belief that anything China could do, it could do better.
High Hopes And Bad Analytics
On its way to bankruptcy, Northvolt blew through €15 billion. An equivalent battery factory woud cost €1.5 billion in China or €3 billion outside of China. How did Northvolt spend five times that amount and still fall short of its goal? Barnard says the seeds of Northvolt’s destruction began with not understanding the market and underestimating China. Northvoilt thought that there was going to be a big shortage of batteries because no one could possibly scale to meet demand. But that’s not what happened.
“China scaled up to five times Northvolt’s prediction. Getting China wrong is a major western failure right now, and until they get China right, they will continue to fail. Partly because they predicted a massive shortage, the batteries they managed to produce were too expensive for the market. They predicted battery prices would remain high — a common and fundamental failure in a lot of the west — and so they did not work tirelessly to bring their unit production costs down,” Barnard said.
Next, the company chose to build its factory in Skellefteå near the Arctic Circle because it offered an abundance of low-cost hydropower. But it had no skilled workforce and the engineers it hired for its R&D center refused to decamp with their families to the frozen tundra in the north of Sweden. A comedy of errors or a tragedy of relying on hopes instead of hard headed busiess principals? Perhaps it was a little of both.
Europe initially was proud of its homegrown battery supplier. None other than BMW signed a contract for delivery of Northvolt battery cells, but when the company could not deliver conforming battery cells on time and at the agreed upon price, that’s when the wheels started to come off the Northvolt wagon and it was a steep ride downhill fr0m there.
Barnard says the number one lesson here is, “Never underestimate China.” Sadly, the United States is firmly commitred to doing precisely that. Some people just refuse to learn.
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