Northvolt AB files Chapter 11

An artist rendering of Northvolt Six, a battery factory under construction in Quebec, Canada. (Illustration: Northvolt)

Stockholm, Sweden-based Northvolt AB has entered a new phase in its journey to become a global battery manufacturer. It has filed for Chapter 11 reorganization in the United States, a move it said will provide it with financing to focus on operational improvements while allowing for restructuring, reorganization, and fundraising to secure its future.

Peter Carlsson. (Photo: Northvolt)

As part of the move, Peter Carlsson will take on a role as senior advisor and step aside as CEO. He remains a Member of the Board.

The filing is expected to give the company access to new sources of funding, including approximately $145 million in cash collateral. In addition, one of Northvolt’s existing customers has committed to $100 million in new financing to support its business operations in the form of debtor-in-possession (DIP) financing, a specialized type of financing for businesses that are restructuring through a Chapter 11 process.

Northvolt’s key customers have included energy storage company Fluence Energy, BMW, Scania, Volkswagen, Volvo Cars and Polestar.

German car manufacturer BMW canceled a multi-billion-dollar contact with the company in June. Fluence said it planned produce its batteries in the U.S., and in September announced the start of production of battery modules in Utah that incorporate battery cells manufactured in Tennessee. More than a year ago, Scania opened a new battery assembly plant in Södertälje, Sweden, that receives Northvolt cells and output battery packs that can be installed directly into its electric trucks on the same site.

Northvolt expects to operate as usual during the reorganization, similar to other international companies that have used Chapter 11 to reorganize their financial obligations. It said the restructuring process in the U.S. is distinct from a bankruptcy or administration proceeding in Sweden or many other countries.

“Today marks a significant new phase for Northvolt as well as for me personally,” said Carlsson. “The Chapter 11 filing allows a period during which the company can be reorganized, ramp up operations while honoring customer and supplier commitments, and ultimately position itself for the long-term. That makes it a good time for me to hand over to the next generation of leaders.”

Carlsson co-founded Northvolt and has lead it since its inception in 2016. The company’s mission was to drive sustainable energy solutions as a pioneer in European battery production.

Northvolt Ett is the company’s lithium-ion battery gigafactory in Sweden. (Photo: Northvolt)

Northvolt Ett to stay open

Northvolt Ett, its flagship battery gigafactory in Skellefteå, Sweden, and Northvolt Labs in Västerås, Sweden, were expected to remain operational. The company announced a number of measures a couple of months ago as part of its strategic review of operations and said that a “rescoping of its operations was considered critical to ensure a sustainable operation and cost base.”

That meant a workforce reduction of 20% at a global level, and 25% in Sweden. At the time it said it would lay off 1,600 Northvolt employees, split across locations in Skellefteå (1,000 positions), Västerås (400 positions) and Stockholm (200 positions).

In Skellefteå, the development of the Northvolt Ett expansion project was to be suspended; the project was intended to provide an additional 30 GWh of annual cell manufacturing capacity. In Västerås, programs and expansion were to be slowed at Northvolt Labs.

By narrowing its immediate focus, Northvolt said it was committed to its initial goal of establishing a European industrial base for battery production. The company has long said that Northvolt Ett was the first truly European battery gigafactory to deliver to customers at large scale.

Germany, North America not included

Importantly, Northvolt Germany and Northvolt North America, subsidiaries of Northvolt AB, are financed separately are expected to continue to operate as usual outside of the Chapter 11 process and remain key elements of the parent company’s strategic positioning.

Those subsidiaries are building facilities in Heide, Germany, and Montreal, Quebec, Canada. Northvolt North America Inc.’s factory, known as Northvolt Six, has reportedly awarded up to $200 million in contracts to Quebec suppliers, and construction work in St-Basile-le-Grand and McMasterville has reportedly progressed without interruption.

“Northvolt Six is ​​a critical part of the company’s future and we remain fully committed to seeing it through,” said Paolo Cerruti, co-founder of Northvolt and CEO of Northvolt North America. “We look forward to continuing to work with all our stakeholders to make this project a success. The site construction execution plan continues diligently and cautiously; including during the restructuring period of the parent company in Sweden.”

As part of the restructuring process, which is expected to be completed in the first quarter of 2025, Northvolt said it will evaluate proposals for new money investment. This process will include engagements with strategic and financial investors, as well as existing lenders, shareholders and customers.

“This decisive step will allow Northvolt to continue its mission to establish a homegrown, European industrial base for battery production,” said Tom Johnstone, interim Chairman of the Board. “Despite near-term challenges, this action to strengthen our capital structure will allow us to capture the continued market demand for vehicle electrification. We are likewise pleased by the strong support we have received from our existing lenders and our customers.

Battery cell production inside Northvolt Ett. (Photo: Northvolt)

“Throughout this process, we will focus on meeting our commitments to our stakeholders, including our employees, customers, suppliers and the governments of the countries in which we operate. As a reorganized entity, we aim to establish a resilient base of operations and a competitive platform for innovation and long-term growth that will advance our work to build a more sustainable society.”

The Chapter 11 filings have been made in the U.S. Bankruptcy Court for the Southern District of Texas. As is customary in Chapter 11 proceedings, Northvolt has filed certain “first day” motions that will allow it to meet its obligations to employees, critical vendors and customers, as well as to continue making tax, insurance and utilities payments. Northvolt may take legal actions in other jurisdictions to facilitate the U.S. Chapter 11 proceedings, which include entities in the U.S., Sweden and Poland.

With Carlsson’s departure as CEO, the company leadership will consist of Pia Aaltonen-Forsell, Chief Financial Officer, and Matthias Arleth, the President of Cells, who will take the role of Chief Operations Officer. Together, and supported by Scott Millar as Chief Restructuring Officer, they will jointly lead Northvolt. The search process for a new CEO has been initiated.