Northvolt's Wobbly Project: Questions Swirl Over Negligence and Guarantees
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Opposition Raises Questions About Northvolt's Promotion Practices - Northvolt's strategically chosen investment sources
The SPD breathes fire at the state government, claiming missteps in the greenhouse for the planned Northvolt battery factory in Heide. Economist Kianusch Stender of the German Press Agency blasts, "When it comes to a billion-dollar project like Northvolt, the 'speed over accuracy' mantra just doesn't cut it." The coalition seems to have overlooked the critical details in project financing.
Economy Minister Claus Ruhe Madsen (CDU) rebuffs the allegations, pointing to the forthcoming PwC study analyzing the project's potential, risks, and default risk for the convertible bond. As a guarantor for half of the bond, the state has joined this review while also carrying out its own in-depth assessments.
"The papers and records show that the state government thoroughly examined the chances and risks. In the final analysis, the state government determined that the project's potential outweighed the risks, and thus proposed to the parliament to approve the guarantee for the convertible bond," says Madsen. The committee convened more than 30 times to discuss the project and approved it unanimously on January 25, 2024.
SPD's Criticism
The fuse for the opposition's criticism was lit by the disclosure of government records in May 2023, related to the PwC study. Redacted emails within the state government reveal pressure from working levels to provide written responses and a tight deadline.
On May 15, 2023, an email from the Economy Ministry states, "...let's specify the tight time frame in even greater detail, excluding the 'smile and wave' approach, for we're actually 'chasing' the information instead." In another email on the same day, the author or authors write: "In the end, only the risks and information gaps that remain visible can be documented, and then it comes down to a decision by the department heads or the HHG legislator (the budget legislator - note of the editor). Unless the next few days bring new insights that make the risk manageable."
Northvolt's Financial Fiasco
Northvolt aims to produce battery cells for a million electric cars annually in Heide, but has been grappling with financial woes for a while. In November, the company filed for bankruptcy protection (Chapter 11 of US insolvency law) in the US. In March, the company also sought bankruptcy protection in Sweden.
This tumultuous state could prove to be a costly blow for the federal government and the state of Schleswig-Holstein. Northvolt received around 600 million euros from KfW, with the federal government and the state each offering a half-guarantee. 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 documents, initiated by the SPD and FDP, stems from central questions regarding whether the state government kept the Kiel parliament in the dark about Northvolt's declared risks and whether these risks were naively mismanaged.
- Northvolt
- SPD
- Due diligence
- State government
- Financial crisis
- PricewaterhouseCoopers
- Negligence allegations
- BMWi
- Billion-euro project
- German Press Agency
- CDU
Insight:
The struggling battery manufacturer, Northvolt, is at the heart of controversy. There are concerns over potential negligence in the handling of the project by the state government, and its impact on the guarantees offered by the federal government and Schleswig-Holstein. Although specific details on these issues are scarce, it's crucial to keep an eye on developments and official statements as the situation unfolds.
Industry Trend:
Financial difficulties and production challenges faced by Northvolt reflect broader issues within the battery manufacturing industry [5]. The due diligence process plays a critical role in assessing the soundness of investments and strategic alignment for such projects [3]. Yet, doubts have arisen concerning the effectiveness of due diligence in certain EU projects [4].
- The SPD continues to criticize the state government over the Northvolt battery factory project, questioning the integrity of due diligence and potential negligence in project financing.
- Vocational training in the battery manufacturing industry may prove valuable, especially in light of the financial woes faced by Northvolt and the subsequent concerns over the future of the billion-euro project.
- The state government's role as a guarantor for half of the bond for the Northvolt project highlights the interconnectedness of industry, finance, investing, business, politics, general-news, and the economy, emphasizing the importance of diligence and transparency in large-scale projects.
