Battery maker Northvolt has filed for bankruptcy in Sweden after failing to secure additional financing or investment, souring a big bet by banks and export credit agencies (ECAs) on European EV battery production.  

A pioneer of green battery production in Europe, the company filed for bankruptcy protection in the US last year after running out of cash, despite securing hefty supply agreements with electric vehicle manufacturers.  

It secured a short-term liquidity lifeline from lenders in November, but said on March 12 that it was “unable to secure the necessary financial conditions to continue in its current form”. 

Some of Northvolt’s outstanding debt owed to commercial banks will be shifted onto the books of European and Asian ECAs, which guaranteed a US$1.74bn deal signed in 2023.   

Germany’s ECA had exposure of US$470mn in outstanding principal that Northvolt owes to commercial lenders, according to November bankruptcy filings. Japan’s Nippon Export and Investment Insurance and Bpifrance covered loans to Northvolt with outstanding principal of US$131mn and US$67mn respectively. 

South Korea’s export-import bank also provided a term loan with US$87mn outstanding, while the European Investment Bank (EIB) has an exposure of US$313mn. As part of the same deal, commercial lenders also had US$602mn in uncovered exposure as of November last year. BNP Paribas, ING, SMBC and UniCredit are among the participating banks. 

A later US$5bn deal involving an even larger roster of ECAs and global banks was never disbursed after the company abandoned plans to expand battery production at its flagship factory in Sweden. 

“This is an incredibly difficult day for everyone at Northvolt,” the company’s interim chairman Tom Johnstone says in a statement. “We set out to build something groundbreaking – to drive real change in the battery, EV and wider European industry and accelerate the transition to a green and sustainable future.” 

Northvolt had managed to cut costs and ramp up battery production in recent months, Johnstone adds. Swedish newspaper Dagens Nyheter reported that the company reported net liabilities of SEK 34.3bn (US$3.4bn) at the end of last year.  

A court-appointed trustee will oversee the sale of several Northvolt group companies and “settlement of outstanding obligations”. The group’s German and US units have not filed for bankruptcy.  

An EIB spokesperson tells GTR the institution “will closely monitor the legal process and work with the administrator to safeguard the interest of the EU and EIB”.  

Despite the setback, the EIB “remains committed to supporting strategic industries that drive the transition to a net zero economy, which is essential for Europe’s prosperity, strategic autonomy, industrial excellence, and sustainable growth,” the spokesperson adds.  

The bank previously said that its exposure is guaranteed by the European Fund for Strategic Investments. 

When the EIB announced funding for the expanded Northvolt facility in Sweden, it said it would be a “fully integrated circular battery production facility that has not previously existed outside Asia”. 

There has been other ECA-backed financing for gigafactories in the EU, including a €4.4bn debt package for a battery maker backed by Stellantis, Mercedes-Benz and TotalEnergies signed last year.  

“It remains key for Europe to have a homegrown battery industry, but it is a marathon to build such an industry,” Johnstone says in the statement. “It needs patience and long-term commitment from all stakeholders.”