Northvolt’s $1.5 billion funding guarantee on hold, Swedish debt office says

STOCKHOLM (Reuters) – Swedish battery maker Northvolt’s decision last month to scrap a major factory expansion in northern Sweden puts on hold key funding for the company that was agreed earlier this year, a Swedish government agency said on Wednesday.

Cash-strapped Northvolt in September announced it would slim down and cut jobs, sparking fears that Europe’s best shot at a home-grown electric vehicle battery champion may stall due to production problems, sluggish demand and competition from China.

Northvolt at the start of the year agreed a $5 billion green loan package with a group of lenders, intended to pay for a planned tripling of its battery-making capacity at Skelleftea in northern Sweden, but this expansion has now been shelved.

The lenders, including the European Investment Bank, the Nordic Investment Bank and more than 20 commercial banks, received guarantees amounting to $1.5 billion from Sweden‘s government Debt Office.

But the money guaranteed by the state agency is unlikely to be disbursed to Northvolt any time soon, officials said.

“Last week the company announced that the expansion is suspended. Our assessment is that the loans therefore will not be disbursed in the near future,” Debt Office Director General Karolina Ekholm said in a statement to Reuters.

Guarantees were only valid if conditions of the original agreement were followed, she added.

Northvolt did not immediately respond to a request for comment on Tuesday. A spokesperson for the company told Reuters on Sept. 24 the company had made significant progress in recent weeks in its effort to raise cash.

The EIB, which agreed to finance more than $1 billion of the $5 billion, said its outstanding loans to Northvolt amounted to $313 million, stemming from a 2020 loan that was due to be refinanced as part of the new package.

(Reporting by Marie Mannes, editing by Terje Solsvik and Jan Harvey)