Northvolt completes mammoth $2.75bn raise

BY RICHARD HEAP:

  • Battery manufacturer concludes blockbuster $2.75bn capital raise
  • Institutional investment will support commercialisation of batteries
  • But influx of investors could exacerbate pressure on raw materials

Swedish battery maker Northvolt this week raised a cool $2.75bn of equity.

That’s the largest equity raise by a private company in Europe, and values Northvolt at a reported $11.75bn. It also shows the huge interest from institutional investors and manufacturers to support batteries that can revolutionise energy and transport.

This takes Northvolt’s equity and debt raised to $6.5bn since its formation in 2016. It plans to use the funds to grow cell production capacity and invest in the research to help it create what it said will be the “greenest battery ever”.

And with demand for battery raw materials on track to outstrip supply, that innovation will be much needed.

Wide interest

The placement was co-led by Swedish National Pension Funds AP 1-4 – via their co-owned company 4 to 1 Investments – and Canadian pensions giant OMERS, as well as existing investors Goldman Sachs and car manufacturer Volkswagen. Volkswagen put in $620m in this round; AP1-4 invested $400m; and the other figures are undisclosed.

The raise also drew in investment from Northvolt’s other current shareholders: AMF, ATP, Baillie Gifford, Baton Capital Group, Bridford Investments, Compagnia di San Paolo through Fondaco Growth, Cristina Stenbeck, Daniel Ek, IMAS Foundation, EIT InnoEnergy, Norrsken VC, PCS Holding, Scania and Stena Metall Finans.

But the most interesting element is the involvement of major institutions.

Deep-pocketed pension funds played an important role in driving money at an early stage into sectors such as offshore wind, to help to commercialise the technology to cut costs and risks. We now see an appetite to do the same for storage as they see that battery technology is of growing importance to a wide range of sectors.

Kristin Magnusson Bernard, Eva Halvarasson, Kerstin Hessius and Niklas Ekvall, chief executives of AP1, AP2, AP3 and AP4 respectively, said the deal makes “a positive contribution both to the pension system and to society at large”.

Peter Carlsson, co-founder and chief executive of Northvolt, said the $2.7bn would help the company to deliver on its “mission of building the world’s greenest battery to enable the European transition to renewable energy”.

It will do this with a network of large battery production plants.

Northvolt is set to open its first battery gigafactory, Northvolt Ett, in Sweden this year with 60GWh of annual battery production capacity. Carlsson said the company is also set to build two more gigafactories in Europe in the 2020s and is looking at potential sites in Germany.

Northvolt is targeting 150GWh of deployed annual production capacity in Europe by 2030, for car makers such as BMW, Scania and Volkswagen, and other firms such as Fluence.

The company has also committed to source 50% of all its raw materials from recycled batteries by 2030. This is vital given the fears of a growing imbalance between battery demand and the raw materials needed.

Raw materials

Now there’s no two ways about it. This is a great fundraising to demonstrate that the battery sector is of interest to traditionally risk-averse investors.

Alexander Hartman, chief financial officer at Northvolt, said this type of huge fundraisings for European battery manufacturers will become more common, because batteries play an important role in the growth of renewables and electric vehicles.

He said: “This is a new European industry in the making and it will require significant investments over the coming decade. It is encouraging to see that the investor community has identified the opportunity early, and we hope to see more investments throughout the value chain over the coming years.”

But there is a challenge too. Huge investments in battery manufacturers will put extra pressure on supplies of raw materials.

The Battery Materials Review’s annual tracker in mid-May showed $5.2bn had been raised by companies in the battery materials sector in the first four-and-a-half months of 2021. It warned that this is far too little if battery makers are to get the raw materials that they need.

It is right that Northvolt is focused on recyclable materials – but recycling only works if there are enough raw materials going into the sector in the first place, which can then be recycled.

It’s right to celebrate this raise but there’s lots of work to be done.

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