Controversy at Battery Manufacturer: SPD Slams State Government for Rushed Northvolt Support
Emphasis by opposition on carefulness in Northvolt public endorsement - Opposition voices rising over the Northvolt undertaking
The SPD can't help but rant about the state government's missteps in promoting the impending Northvolt battery factory in Heide. According to economist Kianusch Stender from the German Press Agency, "When it comes to a billion-dollar project like Northvolt, we should prioritize precision over speed." The coalition has been sloppy with how they've handled the project's financing.
Economy Minister Claus Ruhe Madsen (CDU), however, brushes off the accusations and highlights the federal government's commissioning of a study from the consulting firm PwC on the chances, risks, and default probability of the convertible bond. The state government, acting as a guarantor for half of the bond, has joined this review but performed its own assessments as well.
"Documents and files reveal that the state government has meticulously studied the potential advantages and threats. After weighing the options, the state government decided that the advantages of the project outweighed the risks and, thus, proposed the guarantee for the convertible bond to the legislature," said Madsen. The committee has deliberated the project in over 30 meetings and eventually approved it unanimously on January 25, 2024.
SPD Blasts
The basis for the opposition's complaints stems from the release of state government documents in May 2023 concerning a questionnaire regarding the PwC study. Internal correspondence within the government indicates a desire for written responses from the affected ministries and pressure to provide answers.
In an email from the Economy Ministry on May 15, 2023, it reads, among other things: "...and we must also clarify the tight deadline, although this shouldn't mean, overstating, we're 'brushing things under the rug' for us, since we're more 'hunting for information'."
In another email on the same day, the author or authors note: "In the end, only the current risks and information gaps can be listed, and the decision ultimately falls to the department heads or the HH legislature (the budget legislature - note of the editor). Unless the next few days yield new insights making the risk manageable."
Ignoring Red Flags?
SPD member Stender criticizes the questionnaire on the PwC study as insufficiently answered. "Only a few months prior to the cabinet decision to shoulder a guarantee of this magnitude, the state government seemingly disregarded justified warnings from its own experts."
It seems that critical comments, particularly within the Economy Ministry, were consistently disregarded, says Stender. "If you don't even bother to conduct a risk assessment, the least you should do is professionally analyze the available data." This costly mistake is becoming increasingly apparent.
Financial Troubles at Northvolt
Northvolt aims to manufacture battery cells for up to one million electric cars per year in Heide, but has been grappling with financial issues for quite some time. In November, the company filed for Chapter 11 bankruptcy protection in the United States. Just in March, they filed for insolvency in Sweden.
Northvolt's financial woes could turn costly for the federal government and the state of Schleswig-Holstein. The company 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 allows the holder the additional rights to exchange these securities for shares within a specified timeframe.
The SPD and FDP's request for access to documents in this case arises from the central question of whether the state government kept the Kiel parliament in the dark about Northvolt's risks before agreeing to the guarantee and their perceived reckless handling of those risks.
- Northvolt
- SPD
- Attention to Detail
- State Government
- Missteps
- Crisis
- PricewaterhouseCoopers
- Double-checking
- German Press Agency
- CDU
- Billion-dollar project
Insight:
The rigor of the state government's risk assessment for the Northvolt battery factory project before agreeing to the guarantee can be evaluated using available information. Specifically, the German federal government and Schleswig-Holstein's substantial financial backing of Northvolt, combined with ongoing investigations into the company's bankruptcy, suggest possible oversights or underestimations of risks. Additionally, internal correspondence hints at a hasty response to the questionnaire sent for the PwC study, which may have resulted in inadequately addressing valid concerns from state experts or failing to conduct a thorough risk assessment. Proper evaluation of risks is crucial for avoiding expensive missteps in large-scale green technology projects.
- The SPD suggests that the state government's handling of the Northvolt project may have shown a lack of attention to detail, as indicated by the hurried release of documents and emails that seem to hint at a rushed response.
- The State Government's questionnaire regarding the PricewaterhouseCoopers study was criticized as insufficiently answered by SPD member Kianusch Stender, who questions whether valid warnings from state experts were disregarded.
- Economic and political analysts, upon reviewing the state government's actions related to Northvolt, have begun to question the rigor of the risk assessment conducted before agreeing to the guarantee, and whether it could lead to costly mistakes.
- The crisis surrounding Northvolt's financial troubles raises concerns about the state government's role in facilitating investments in the future of sustainable technologies, and whether they have done so with due diligence and caution.
