Northvolt declares bankruptcy in Sweden, raising concerns about Quebec battery plant's future

Northvolt, the Swedish battery manufacturer with plans to build a $7-billion factory in Quebec, has declared bankruptcy in Sweden.

The company said in a media release that the decision to declare bankruptcy was taken after "an exhaustive effort to explore all available means to secure a viable financial and operational future for the company."

Northvolt has "experienced a series of compounding challenges in recent months that eroded its financial position, including rising capital costs, geopolitical instability, subsequent supply chain disruptions, and shifts in market demand," the release says.

The company says its North American operations are solvent.

Now, a court-appointed trustee will determine the future of Northvolt's businesses and assets, including technology and production facilities, the company said. 

It was not immediately clear how the company's bankruptcy would affect the future of a massive $7-billion electric vehicle battery plant Northvolt is building in the Montérégie region on Montreal's South Shore. 

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It’s unclear whether the plans for the massive electric vehicle battery plant on Montreal's South Shore will go ahead. The Quebec government has invested $270 million into the project so far.

In 2023, the Quebec government pledged $2.9 billion in financing to secure the deal with Northvolt. Ottawa committed up to $1.34 billion to build the plant and another $3 billion worth of other incentives.

So far, the Quebec government has invested $270 million in the project and the provincial pension investor, the Caisse de dépôt et placement du Québec (CDPQ), has also invested $200 million. Quebec granted Northvolt a further $240 million for the purchase of land in the Montérégie region.

Quebec Economy Minister Christine Fréchette said in a post on X that the government was disappointed in the situation, but said they were evaluating their options.

"Our wish is that the controller will start looking for a buyer who will invest to take over all North American activities and relaunch the Montérégie project," she wrote. 

Opposition pans government's economic judgment

Opposition parties at the National Assembly were quick to lash out, accusing the government of mismanaging public funds.

"We're going to be losing hundreds of millions of dollars in a bet that our government in Quebec made on a poorly negotiated investment," said Parti Québécois MNA Pascal Paradis in an interview Wednesday on CBC's Daybreak.

Paradis, the party's energy critic, indicated he's not confident it will be possible to recoup Quebec's $470 million investment.

"That money is lost," he said.

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Other parties reiterated Paradis' concerns on social media, with Québec Solidiare MNA Alejandra Zaga Mendez bemoaning the government's poor judgment. 

"Just because we have millionaires in a government doesn't mean we have good managers. In the midst of a trade war, we have yet another demonstration of this government's lack of economic judgment," she wrote on X.

Fréchette, for her part, downplayed the potential impact of the bankruptcy.

"Although the $270 million invested in the parent company has lost its value, the $240 million loan is guaranteed by our security interests in the land and assets of the Northvolt North America subsidiary," she wrote in French on X.

'Things have become fragile,' mayor says

Despite the bankruptcy of Northvolt's parent company in Sweden, Northvolt North America, a subsidiary of the Swedish company, said in a media release that it remains solvent and intends to honour its obligations and meet its financial commitments.

The Swedish government has also indicated that it could step in to support the company. 

The mayor of Saint-Basile-le-Grand, where work on the future battery plant was already underway, remained hopeful but unconvinced the project would be completed. 

"You have to be realistic, from the moment Northvolt declared bankruptcy in Sweden, things have become fragile," Yves Lessard said in French. 

Yan Cimon, a business administration professor at Université Laval in Quebec City, said there could be ways to save the project, but the timing isn't good "given the trade war and the lack of access to the American market right now and also the fact that Northvolt has had operational issues beforehand," he said. 

"But you know, there is still a need for a global western battery powerhouse, it just doesn't seem to be Northvolt at the time."