(Bloomberg) -- Norway’s Morrow Batteries AS is facing an existential crisis as it awaits approval of government funds vital to attracting investors in an industry scarred by the collapse of Swedish startup Northvolt AB.
Morrow, which earlier this year opened the doors to its first lithium-iron phosphate battery factory in southern Norway, is in urgent need of clarification on 1.5 billion kroner ($135 million) in government funding, according to Chief Executive Officer Lars Christian Bacher. While the company has succeeded in producing early stage components, the bankruptcy of much-larger peer Northvolt last week has muddied the outlook for European battery makers in the face of Chinese dominance.
“For Morrow, this is about existing or not existing,” Bacher wrote in a redacted Nov. 12 letter obtained by Bloomberg to Trade and Industry Minister Cecilie Myrseth. “Without risk relief, we can’t keep or attract investors to work with us to develop the company further.”
Though Innovation Norway - the government agency considering the loan request - has proposed terms to the battery-maker, it said that any borrowing beyond 500 million kroner will be more expensive, according to Norwegian business daily Dagens Naeringsliv, which was the first to report on the letter.
The situation is still developing and meetings are being held to secure a loan on terms in line with the market, Bacher said in a separate comment to Bloomberg on Wednesday.
A ministry spokesperson by e-mail said that the funding is underpinned by “set criteria.” Innovation Norway didn’t immediately respond to comment.
Shareholders include power producer A Energi, which owns about 50% of the battery maker, ABB Ltd. and Siemens AG. Together they have invested more than 3 billion kroner in the company, including a €48.4 million ($52.8 million) private placement approved in May.
Morrow, founded in 2020, submitted its application in June and wants to secure government funding by the end of next month to pay off the cost of the factory, which was unveiled by Prime Minister Jonas Gahr Store in August.
“The promised state support and commitment are crucial to sending a positive signal to new investors,” Brandon Spencer, an executive at investor ABB Ltd., said in a letter dated Nov. 6. “Despite the public announcement of government support, no help has yet materialized, making it impossible to raise more equity. Consequently, all financing options are now exhausted.”
Innovation Norway has made a “grounded assessment” of the company, including meetings and document reviews, Bacher said in his letter. He argued that the government organization hasn’t taken into account equipment with a resale value of as much as 1.3 billion kroner that can be used as collateral for the loan. The funding “can be priced at a significantly lower interest rate,” Bacher said, citing feedback from advisers.
Co-owner Siemens Project Ventures GmbH also voiced “deep concerns” over significant delays in the granting of funds earmarked for investments in green industry, according to a letter signed by Steffen Grosse and Beatrice Bock.
“We have now reached a critical stage: Morrow Batteries requires a swift implementation of the green loan which truly reflects risk sharing in line with the political decisions adopted in Norway, to ensure the growth of the company and to enable the attraction of additional private capital in the next phase,” they wrote.
(Updates with comment from ministry spokesperson in sixth paragraph)
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