Quebec Government Halts Funding Support for Northvolt Battery Project

According to Bloomberg, the Quebec provincial government in Canada has terminated its participation in Northvolt AB's electric vehicle battery factory project in Canada. With the company's bankruptcy, this highly anticipated project has officially come to an end.

Image source: Northvolt

Quebec's Minister of Economy, Christine Frechette, stated in a declaration: "We have decided to terminate funding for the Northvolt project within Quebec, as the company has failed to present a satisfactory proposal that serves the interests of Quebec. We will defend our rights and strive to recover as much of the investment as possible. It has become evident that this collaboration was unsuccessful, and we are clearly disappointed by this."

In August this year, Lyten, a lithium-sulfur battery startup based in California, USA, agreed to acquire all of Northvolt’s remaining assets in Europe. However, the financial details were not disclosed by either party. At the time, Lyten stated that it was acquiring these assets at a “significant discount” to Northvolt’s estimated valuation of approximately $5 billion.

Lyten had shown interest in Northvolt's project in Canada—the construction cost of which is expected to exceed $5 billion—but the Quebec provincial government was lukewarm toward this potential acquisition. Northvolt's bankruptcy has come at a high political cost for the ruling Coalition Avenir Quebec (CAQ).

Northvolt's Canadian subsidiary stated in an email: "This decision is deeply regrettable for Northvolt North America, especially considering the significant and ongoing efforts we have made to find a buyer. We want to emphasize that Northvolt North America has not entered bankruptcy and still possesses substantial resources needed to restart the project."

According to the Quebec Ministry of Economy, Quebec has lost 270 million CAD (approximately 196 million USD) on the Northvolt project but still holds a priority secured loan related to the project's land — the land was purchased for building a battery factory near Montreal, with the total loan amount, including interest and fees, reaching 260 million CAD. The statement also noted that after terminating investment in the Northvolt project, Quebec will free up 352 megawatts of electricity, which can be used for other industrial projects in the province.

Multiple Canadian pension funds have also suffered losses due to the bankruptcy of Northvolt. The Ontario Municipal Employees Retirement System recorded a loss on its $325 million investment in the project; the Caisse de Depot et Placement du Quebec disclosed that its $150 million investment in the project has been written down to zero; and the Investment Management Corp. of Ontario similarly wrote down its $400 million investment.

In 2023, to attract Northvolt to settle, the Canadian federal government and the Quebec provincial government pledged to provide subsidy support on the same scale as the subsidies for manufacturing under the U.S. Inflation Reduction Act. If the project proceeds, the total amount of subsidies during the construction and battery production phases alone could exceed $5 billion.