Scandal at Northvolt Factory: Opposition Questions Haste in State Promotion
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Opponents emphasize strategic marketing efforts for Northvolt - Opponents express worry over Northvolt initiative
The SPD accuses the state government of neglect in the promotion of the planned Northvolt battery factory in Heide. "Rushing ahead without proper scrutiny isn't acceptable in a billion-euro project like Northvolt," says economist Kianusch Stender of the German Press Agency. The coalition has not conducted thorough investigations on the project's financing.
Economy Minister Claus Ruhe Madsen (CDU) dismisses these allegations and refers to the fact that the federal government, as a guarantor for the convertible bond, has commissioned a study by PwC on the potential, threats, and default probability of the convertible bond. The state, as a guarantor for half of the bond, has participated in this review but also performed its own assessments.
"The documents conveyed and files reveal that the state government has transparently evaluated chances and risks. As a result of this assessment, the state government decided that the project's potential outweighed the threats and therefore proposed a parliamentary agreement for the guarantee for the convertible bond," said Madsen. The committee has discussed the project in more than 30 meetings, ultimately giving a unanimous green light on January 25, 2024.
SPD Criticism
The basis for the opposition's criticism is the release of state government documents regarding a questionnaire on the PwC study in May 2023. From the partly redacted correspondence within the state government, it can be seen that there was a desire for written answers from the ministries involved and that the pressure was high.
In an email from the Ministry of Economics on May 15, 2023, it says, among other things: "...and the tight time frame should also be clarified further, although this shouldn't imply, so to speak, a 'nod and wink' response from us, as we are rather 'chasing after' the information."
In another email on the same day, the author or authors write: "Ultimately, only the current risks and information gaps can be noted, and it remains a decision of the department heads or the legislature. Unless the coming days bring insights that ease the risk, we risk a costly error."
Ignored Warnings?
SPD man Stender criticizes that the questionnaire for the PwC study was not answered adequately. "Merely a few short months before the cabinet decision to assume responsibility for such a massive guarantee, the state government overlooked justified cautions from their own experts."
It seems that critical notes, especially in the Ministry of Economics, were systematically disregarded, says Stender. "If you don't even bother to perform your own risk assessment, you should at least responsibly examine the available information," he stated. This mistake has proven to be expensive.
Financial Crisis at Northvolt
Northvolt aims to manufacture battery cells for up to one million electric cars per year in Heide, but has been faced with financial turmoil for quite some time. In November, the company filed for bankruptcy protection (Chapter 11 of US insolvency law) in the USA. In March, the company also sought insolvency in Sweden.
The crisis could inflict substantial costs on the federal government and the state of Schleswig-Holstein. Northvolt has received approximately 600 million euros from the state-owned development bank KfW, with the federal government and the state each guaranteeing half. A convertible bond is a corporate bond that gives the holder additional rights to exchange these securities for shares within a certain timeframe. The reason for the request for access to documents in this case, initiated by the SPD and FDP, lies in the central question of whether the state government kept the parliament in Kiel in the dark about Northvolt's company risks before assuming the guarantee and acted carelessly with these risks.
- Northvolt
- SPD
- Financial analysis
- State government
- Haste
- Crisis
- PricewaterhouseCoopers
- Oversight
- BMWi
- Billion-euro project
- German Press Agency
- CDU
Details about Northvolt
- Origin: Northvolt emerged in 2016, driven by the ambition to become a leading battery manufacturer for electric vehicles in Europe[1].
- Financial Struggles: Northvolt grappled with financial issues, filing for Chapter 11 bankruptcy protection in the U.S. in November 2024. The company had spent approximately $15 billion USD over eight years[1].
- Involvement of Governments: Various governments, including Canada, heavily invested in Northvolt[1]. Canada pledged $7.3 billion CAD ($5.4 billion USD) in loans, equity shares, and incentives for constructing battery factories in multiple locations.
Lack of Specific Information on Due Diligence and SPD Criticism
- Search results lack specifics about the due diligence process or the SPD's criticisms regarding possible oversights or disregarded warnings in the Northvolt project.
Generally, the Role of State Governments in Such Projects
- In general, state governments often play a significant role in supporting large-scale ventures like battery factories by providing subsidies, loans, and regulatory support. Such efforts aim to encourage investment and work towards strategic objectives, such as reducing dependence on foreign supply of critical materials like lithium[3]. Criticism from parties such as the SPD might arise if there are perceived oversights or disregarded warnings regarding financial sustainability, environmental impact, or strategic risks associated with these projects.
- The SPD's criticism of the state government's handling of the Northvolt project revolves around the perceived haste in promoting the billion-euro project, with concerns about inadequate financial analysis.
- The state government, as a guarantor for half of Northvolt's convertible bond, commissioned a study by PricewaterhouseCoopers but seems to have overlooked justified cautions from its own experts when answering the questionnaire for the PwC study.
- Critical notes, especially in the Ministry of Economics, were systematically disregarded, raising questions about the state government's due diligence process and oversight in the Northvolt project.
