(Bloomberg) -- Sweden’s Northvolt AB has hired consulting firm Teneo for restructuring advice, including contingency planning should the debt-backed battery maker fail to reach revised terms with lenders, according to people familiar with the matter.
The preparations are part of Northvolt’s response to a fast-moving liquidity crisis, said the people, who asked not to be identified because the matter is private.
Teneo’s appointment underscores the gravity of Northvolt’s cash crunch as the electric-vehicle supplier negotiates with lenders over potential concessions.
The financial challenges have cascaded quickly amid a drawn-out production ramp-up that’s starved the battery maker of much-needed revenue. Northvolt also hasn’t had access to a $1.5 billion portion of a $5 billion green loan facility announced in January. Creditors are set to meet Friday to make decisions about the loan, local outlet Dagens Nyheter reported earlier.
As negotiations with lenders and investors proceed, the company said Monday that it would slash staff by about 20% globally to focus on raising output at its main plant at Skelleftea, in northern Sweden.
Northvolt has made significant progress in financing talks over the past couple of weeks, a company spokesman said in an email, declining to provide specifics. Teneo, a global advisory firm, declined to comment.
The budding crisis marks an abrupt turnaround for a company that earlier this year had an initial public offering in its sights. Then came quality issues that led BMW AG to back out of a €2 billion ($2.2 billion) order in June, a slower-than-expected increase in cell production at Skelleftea, and a general slowdown in EV demand. Meanwhile, competition intensified with Chinese companies that dominate EV battery production.
The developments have put Northvolt’s survival at risk, at the same time dealing a blow to Europe’s efforts to establish an independent supply chain for EV cells. While it has taken in more than $20 billion in investments and public grants to build a European battery champion, the company has had to sell assets and scale back operations as cash dwindles.
Northvolt has been in talks with lenders over a potential breach of the terms of the $5 billion green loan, one of the biggest of its kind, according to reports in the local press. A Northvolt spokesman confirmed that the $1.5 billion piece guaranteed by the Swedish government hasn’t been disbursed.
Creditors have picked PJT Partners as financial adviser, Bloomberg News reported last week, while Milbank is providing legal counsel. Dagens Industri reported this month that the company was looking to raise 7.5 billion kronor ($737 million) to make September’s payroll.
Battery Travails
Other attempts to stand up battery production in Europe underscore the difficulty of the task. This month, Italy cut funding to a battery-plant project backed by Stellantis NV and Mercedes-Benz Group AG amid the EV slump. UK battery startup Britishvolt Ltd. fell into administration last year before it could open a planned £3.8 billion ($5.1 billion) site.
Northvolt has been working on its business plan as part of a strategic review, and is also being advised by its longtime investment bank, Rothschild & Co. and law firm A&O Shearman, Bloomberg News reported earlier.
Volkswagen AG, Northvolt’s top shareholder with about a 20% stake, on Monday reiterated its support for ramping up the company’s existing production lines. It declined to comment on any financial investments.
BMW said it hadn’t changed its investment in the battery maker, which stood at 2.8% at the end of 2023, and had no plans to do so. A spokesman declined to comment on whether it would take part in any further investment rounds to maintain its ownership level.
The Swedish government on Monday reiterated its stance that there would be no emergency aid to help the battery maker. Instead, it urged the company to continue its dialog with state-backed lender SEK and the debt office.
“We urge Northvolt to continue its dialog with authorities and others who could assist with loans to aid the financial situation,” Energy Minister Ebba Busch said on Swedish radio.
German Economy Minister Robert Habeck said Monday the government is in constant contact with Northvolt. He noted that production shortfalls necessarily have an impact on revenue.
Last week, Bloomberg News reported a sign of progress on the operational front — weekly battery cell production hit a record at the Skelleftea facility, the company said.
--With assistance from Wilfried Eckl-Dorna, Iain Rogers and Charles Daly.
(Updates with held-back portion of loan, creditor meeting in fourth paragraph)
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