Competitors Zero In on Government's Support for Northvolt Industrial Push - Opponents express apprehensions over the Northvolt undertaking
Let's Dish the Tea on Northvolt's Turmoil: Opposition Lays into State Government's Flippant Promotion Approach
The SPD is barking up the wrong tree, or so says Minister Claus Ruhe Madsen (CDU), who refutes allegations accusing the state government of being reckless when promoting the planned Northvolt battery factory near Heide. Kianusch Stender of the German Press Agency has some harsh words for the state government, saying, "With a billion-dollar project like Northvolt, the principle 'go, go, go' can't fly." The coalition is suspected of skimping on their financial evaluation of the project.
Ruhe Madsen isn't taking this lightly and points to a study commissioned from consultancy firm PwC, which delves into the upsides, downsides, and the likelihood of default for the convertible bond serving as a guarantee. The state, acting as a guarantor for half of the bond, is part of this examination and has conducted its own assessments as well.
"Examining the documents clearly shows that the state government has weighed the chances and risks extensively. After taking all factors into account, they arrived at the conclusion that the project's advantages outweigh the risks, leading to the proposal to approve the guarantee for the convertible bond," said Ruhe Madsen. A whopping 30 committee meetings were held, resulting in a unanimous green light on January 25, 2024.
SPD's Complaints
The opposition's critique regarding the Northvolt project stems from the release of files from the state government concerning a questionnaire on the PwC study in May 2023. The correspondence within the state government suggests that there was pressure for definitive responses from the affected ministries and a tight time frame.
In an email from the Economy Ministry on May 15, 2023, it states, "...and the short fuse would also like to be specified more specifically, because this can't mean 'wooden faces' for us, as we are busy chasing information." In another email on the same day, the author or authors explain, "Ultimately, only current risks and information gaps can be noted, and it's up to the department heads or the HH legislature (budget legislature - editor's note) to make the final call. Unless the next few days bring some clarity, these risks will remain unmanageable."
Ignores Warnings?
Stender took issue with the fact that the questionnaire on the PwC study wasn't adequately addressed. "In the months leading up to the cabinet's decision to take on a guarantee of such magnitude, the state government blatantly overlooked the legitimate concerns voiced by their own experts."
It seems that critical comments, especially from the Economy Ministry, were sidelined, said Stender. "If you're not even willing to conduct a thorough risk assessment, at least be responsible and carefully evaluate the available information." This oversight has turned out to be an incredibly costly blunder.
Northvolt's Money Pit
Northvolt aims to produce battery cells for one million electric cars each year near Heide, but the company's been grappling with financial woes for quite some time. In November, the company sought refuge under Chapter 11 of U.S. bankruptcy law, and in March, it also filed for insolvency in Sweden.
The financial mess at Northvolt might prove to be a money pit for the federal government and the state of Schleswig-Holstein. Northvolt is said to have received approximately 600 million euros from KfW, a government-owned development bank, with the federal government and the state each guaranteeing half. A convertible bond is a bond that, in addition to the regular securities, grants the holder the option to swap these for shares within a specified period.
The impetus behind the SPD and FDP's request for access to documents in this case lies in the fundamental question about whether the state government kept the Kiel parliament in the dark about Northvolt's risks before taking on the guarantee and whether they handled these risks negligently.
- Northvolt
- Northvolt Drei
- SPD
- Due diligence
- State government
- Financial crisis
- PricewaterhouseCoopers
- Negligence
- Economy Ministry
- Billion-dollar project
- German Press Agency
- CDU
- Chapter 11 bankruptcy protection
- The SPD and FDP are questioning whether the state government properly carried out due diligence regarding the financial risks of Northvolt, a billion-dollar project, before assuming the guarantee for a convertible bond.
- The state government is under scrutiny for its approach in handling the Northvolt Drei project, with criticism that they overlooked legitimate concerns from their own experts in the process, potentially leading to negligence.
- Amidst Northvolt's financial crisis, the financial implications for the federal government and the state of Schleswig-Holstein could prove considerable, considering the 600 million euros provided by KfW, with each entity guaranteeing half of a convertible bond.
