(Bloomberg) -- Sweden’s National Debt Office has ruled out activating $1.5 billion in credit guarantees for Northvolt AB that were tied to a now-halted expansion of the battery manufacturer’s main factory.
Northvolt suspended the build-out at its plant in northern Sweden last month as it sought to streamline operations and contend with a cash crunch.
The troubled electric-vehicle supplier never drew the guaranteed funds, and this week put the unit managing the project at Skelleftea, near the Arctic Circle, into bankruptcy.
“The loans that our guarantee would cover were intended to finance the Skelleftea expansion, which the company now has halted,” NDO Director General Karolina Ekholm said in emailed response to questions from Bloomberg.
Northvolt has pared back its growth plans and said it will now focus on raising production at the main Northvolt Ett plant in Skelleftea. The facility’s chief executive officer, Mark Duchesne, stepped down on Wednesday, dealing a setback to the ramp-up plans.
The company is scrambling to line up financing that would shore up liquidity and allow it to continue in business. A $28 million tax bill due Oct. 14 could be the company’s next financial hurdle.
Northvolt had no immediate comment on the loan guarantees.
The NDO guarantees were part of a $5 billion green-loan package — one of the largest of its kind — announced by Northvolt in January. It included funding for the expansion at the Northvolt Ett plant and refinancing of a $1.6 billion debt package signed in 2020.
A group of Northvolt lenders selected investment bank PJT Partners to help advise on options, Bloomberg News reported last month.
Ekholm said lenders could provide loans for other purposes “but our guarantee specifically relates to the Skelleftea expansion and cannot be applied to financing of existing operations without our approval.”
The NDO is open to new requests, Ekholm said, as long as they meet Sweden’s regulations on credit guarantees for green investments.
Those rules could present an obstacle for Northvolt, because they bar guarantees to companies defined by the European Union as “firms in difficulty.”
--With assistance from Rafaela Lindeberg.
(Updates with main plant CEO stepping down)
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