Northvolt 'Greens Up' with Debt

The coins are jingling in the pocket of Sweden’s leading lithium-ion battery developer Northvolt AB after it raised $1.6 billion in new capital through a debt financing.  Nordic Investment Bank led a group of banks and pension funds in the round.    Northvolt is not just another gigafactory wannabe.  Its leadership wants to deliver the ‘greenest’ battery for consumers’ mobile devices and electric vehicles. 

Northvolt is targeting 2021, to begin production in its factory located near Skelleftea, Sweden.  By 2024, the management wants to stamp out batteries with as much as 32 gigawatts hours of energy.  Distinguishing Northvolt from every other battery maker housed in a big building is Northvolt’s plan to integrate its supply chain, buying directly from mining companies for the metals that are required for lithium ion batteries.  Reportedly, Tanqui Lithium Corporation (002466:  Shenzhen) is one of Northvolts lithium hydroxide suppliers.

Then Northvolt plans to manufacture its own components such as the cathode and complete battery assembly itself.  Bringing these processes in-house gives Northvolt more control over power usage and recycling. The company’s reputation as a ‘green’ manufacturer will be further burnished by sourcing electricity from a hydroelectric utility.

An important element in Northvolt’s ‘green’ aspirations is retrieval of important metals from recycled batteries.  The company is reportedly preparing a facility to recycle lithium ion batteries to save precious metals such as gold or tough to source materials such as cobalt.  Northvolt’s chief executive officer, Peter Carlsson, has promised that as much as half of its metals supplies could come from recycling efforts.  He should have some knowledge given this history as a Tesla employee and Tesla’s experience with recycling through its battery materials partner Umicore SA in Belgium.  Umicore apparently believes in spreading around its materials recycling knowledge.  In 2018, Umicore joined Northvolt in forming a joint technology partnership with BMW Group.  The trio intended to work on a sustainable value chain for electric car battery cells.

In short order Northvolt will get a chance to deploy its new capital.  Mid-July 2020, the company inked a long-term contract valued at Euro $2 billion (US$2.3 billion) with BMW Group for Northvolt’s battery cells.  The contract makes Northvolt the third major supplier of battery cell technology for BMW behind Samsung SDI in Korea and Amperex Technology Co., Ltd. in China.  BMW recently introduced a new all-electric SUV that is expected to compete with the Jaguar’s I-Pace and has indicated it plans to have at least a dozen electric vehicles on the road by the end of 2023. 

Northvolt engineers are likely well acquainted with BMW’s electric vehicle road map.  In 2019, BMW Group participated in an earlier financing round in which Northvolt raised US$1 billion.  Volkswagen Group and Goldman Sachs were also participants in that round.  The proceeds were used to build Northvolt’s production facility in Sweden.

As Northvolt seeks financing from a select group of private investors, minority investors are left out in the cold.  Northvolt has yet to make public just how ‘green’ Northvolt’s batteries have become.  It is likely to take some time for the company to reveal the data on its own carbon footprint.  However, expect to read all sorts of claims as soon as Northvolt needs to make an impression on a car maker other than its two early strategic financing sources, Volkswagen and BMW.    

 

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.