Northvolt: A start-up raising billions in a new industry

That is impressive and signals it is on to something big. Northvolt, a Swedish battery firm started by two former Tesla executives, is doing just that. “Our goal is to have established enough capacity in 2030 to have a 25% market share in Europe, so we will be busy over the coming years”, Northvolt’s Chief Financial Officer, Alexander Hartman, said in an interview with NIB Newsletter.

The electric vehicle battery market is driven by increasing awareness of climate change: demand for zero-emission vehicles with longer ranges is growing and meeting this demand is made possible by decreasing the costs of sustainable battery cells and systems. Founded in 2016, Northvolt plans to deliver the world’s greenest lithium-ion battery with a minimal CO2 footprint and has high ambitions for recycling.

So far, Northvolt has taken over USD 3 billion in equity and debt to finance the building of two lithium ion battery factories, Northvolt Ett in Skellefteå, Sweden, and Northvolt Zwei in Salzgitter, Germany, as well as financing R&D investments and recycling.

As part of this financing, Northvolt raised USD 1.6 billion in July from a consortium of commercial banks, pension funds and public financial institutions, among them is the Nordic Investment Bank (NIB).

NIB is participating in the financing of Northvolt Ett with a ten-year loan of USD 44.3 million. The first part of Northvolt Ett is scheduled to start production in 2021 and will be one of Europe’s largest battery factories. The factory will produce up to 40 GWh of battery capacity annually. The batteries are designed for use in vehicles as well as for power storage and other industrial purposes. Northvolt plans to start recycling batteries from 2022 onwards.

Northvolt’s Chief Finance Officer Alexander Hartman says that having “these world-class financial institutions supporting a new industry in Europe is a clear sign of where the markets are headed and the opportunity that brings for sustainable projects.”

After having worked with so many different financial institutions, how would you describe the process?

“It is a unique project with no precedents so we had to put a lot of effort into the structuring phase. Also having to deal with and explain our business and setup as well as negotiate with many institutions has been quite cumbersome. In the future, we will be in a much better position with a precedent and we know where a lot of the key questions are”, says Mr Hartman.

What were the most challenging aspects of securing the debt and what were the learning points?

“It has been a lot of work put into the structuring phase. Given Covid-19 it has also been challenging to get everybody in the same room for final negotiations and we had to work in virtual forums that proved to work quite well after a while”, Hartman says.

Producing batteries and then closing the loop by recycling them is a new type of business in Europe. How supportive are the European Union’s policies and where do you see the major gaps?

“I think Europe is getting there quite rapidly. There is new regulation under development in Brussels which will put a strong emphasis on circular manufacturing with a minimal CO2 footprint. We think this is great.”

What can you say about any possible coronavirus implications?

“The travel restrictions have limited us to the extent that is has been difficult to get our suppliers and partners to Sweden. On the other hand, it has pushed us into finding new creative solutions to be able to collaborate remotely.”

What are the next major milestones for Northvolt going forward?

“The start of production in Skellefteå late next year is perhaps the biggest milestone. But there are many more to follow. Our goal is to have established enough capacity in 2030 to have a 25 percent market share in Europe, so we will be busy over the coming years”, says Hartman.