Canadian pension funds and BlackRock team up for US$1.2-billion EV battery maker financing

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Three Canadian pension funds have joined BlackRock Inc. BLK-N in a US$1.2-billion financing for Swedish battery maker Northvolt AB, which is nearing a decision on whether to build a new manufacturing plant in Quebec.

With the financing, Investment Management Corp. of Ontario (IMCO), Canada Pension Plan Investment Board and Ontario Municipal Employees Retirement System, along with BlackRock, the world’s biggest asset manager, have enlarged a convertible debt program to US$2.3-billion. Northvolt launched the program last year. The latest funding comes just two months after IMCO invested US$400-million into Northvolt.

The company said it would use the proceeds to fund European and North American expansion.

“We have found a committed group of investors that understands both the urgent need and massive financial potential in enabling the swift electrification of society,” Northvolt chief financial officer Alexander Hartman said in a statement. “However, there is a long road ahead if Europe and North America are to reach their full potential as leaders of the energy transition.”

Northvolt, whose main plant is in Sweden, has been weighing the potential for a major electric vehicle battery production facility in North America, and has been in talks with the Quebec government on possible locations, according to a source familiar with the process.

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Northvolt spokesperson Anders Thor said he was unable to be more precise about the location for a new plant in North America, but suggested a decision could be made soon.

The company scouted sites near Montreal and Baie Comeau, Que., but has settled on Saint-Basile-le-Grand in the Richelieu Valley for its project, pegged at roughly US$7-billion, according to reports in La Presse and L’Oeil Régional newspapers. The factory’s main site would be on land formerly occupied by Canadian Industries Ltd., a maker of chemicals and explosives.

Investissement Québec, the provincial agency that has been dealing with Northvolt, did not immediately respond to a request for comment. The source said the company is still looking at other potential sites in North America, but location and available talent are seen as positives for Saint-Basile-le-Grand. The Globe is not naming the source, as they are not authorized to speak publicly on the matter.

Quebec is vying for the plant as Canada seeks to compete with a U.S. cleantech industry that has been turbocharged over the past year by incentives that are part of U.S. President Joe Biden’s Inflation Reduction Act. That legislation includes US$369-billion in funding for green energy and related technology as well as EVs and energy efficiency measures. Ottawa and provincial governments have responded with billions of dollars in public funding to lure battery makers and suppliers to building plants in Quebec and Ontario.

The federal and Ontario governments announced a deal in April to provide Volkswagen with up to $13.2-billion in subsidies for production support after the company builds a battery plant in St. Thomas, Ont. In June, Stellantis NV STLA-N and LG Energy Solution reached a deal with those governments for as much as $15-billion in subsidies to restart construction on their EV battery factory in Windsor, Ont.

Quebec has been pushing hard to make the province a hub for EV battery development, luring companies with its low-carbon hydroelectricity and financial backing in tandem with the federal government. General Motors Co. GM-N is partnering with South Korean battery material maker Posco Chemical Co. Ltd. on a new cathode factory in Bécancour, Que. And Ford Motor Co. F-N announced earlier this month that it’s working with South Korea’s EcoProBM and SK On Co Ltd. on a $1.2-billion plant that would produce EV battery materials in that same city, backed by $644-million in public funding.

Ford, others to build $1.2-billion battery materials plant in Bécancour, Que.

Northvolt currently produces batteries for transport and energy storage at a gigafactory in northern Sweden. It emphasizes sustainable production, with the plant powered by emission-free electricity. It has set a goal to produce 150 gigawatts of annual production capacity by 2030, with a focus on keeping a small carbon footprint through regional sourcing of materials and recycling.

Its ownership group includes Volkswagen AG, Bayerische Motoren Werke AG and Goldman Sachs, and the company has been reported to be considering an initial public offering. It has signed US$55-billion in supply deals with such European companies as Volkswagen, BMW, Fluence Energy, Scania AB, Volvo Cars and Polestar.

IMCO has said its investments in Northvolt fit with its climate strategy. Executives with the fund said in June that they have had conversations with Northvolt officials about bringing a plant to Canada, though they said they only offered help with the process if needed.

Meanwhile, Northvolt also said on Tuesday that it has assembled its first battery energy-storage system at a new 25,000-square-metre plant in Gdańsk, Poland. The company said the facility, which is backed by the European Innovation Fund, is expected to start deliveries to energy-storage and industrial customers later this year.