Controversy Surrounding Northvolt's Battery Factory in Heide: Questions Arise Over Government's Due Diligence
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Rival Forces Concentrate on Government's Favoritism Toward Northvolt Financing - Opposition voices raised worries over the Northvolt endeavor
The SPD questions the actions of the Schleswig-Holstein state government, accusing it of negligence in promoting the planned Northvolt battery factory in Heide. Kianusch Stender, an economist from the German Press Agency, comments, "With a billion-euro project like Northvolt, speed cannot overshadow thoroughness." The coalition is facing criticism for insufficient attention paid to the project's financing.
Economy Minister Claus Ruhe Madsen (CDU) counters these allegations, pointing to a review commissioned by the federal government from consulting firm PwC, examining the potential, risks, and default probability associated with the convertible bond. The state, as a guarantor for half the bond, participated in this assessment but also conducted its own evaluations.
"Documents and files reveal that the state government has carefully considered the project's chances and risks," said Madsen. In the end, the state government determined that the project's advantages outweighed the risks, leading to parliamentary agreement on the guarantee for the convertible bond in January 2024.
SPD Criticism
The opposition's criticism stems from the release of documents from the state government in May 2023 about a questionnaire related to the PwC study. Apparent redacted correspondence within the state government suggests a desire for written responses from affected ministries, under high pressure.
An email from the Economy Ministry on May 15, 2023, states, in part, "...and I would also like to know more specifically about the tight time frame, which for us cannot mean: 'smile and wave through', especially since we are rather 'chasing after' the information." On the same day, another email discusses “writing down all the risks and information gaps currently showing up,” followed by a decision by department heads or the Schleswig-Holstein legislature.
Ignores Warnings?
Stender of the SPD argues that the questionnaire on the PwC study was not adequately answered. He accuses the state government of ignoring justified warnings from its own experts, "Just before committing to a guarantee of this magnitude, the state government failed to conduct a comprehensive risk assessment."
Critical notes, particularly within the Economy Ministry, seem to have been systematically overlooked, according to Stender. "If a thorough risk assessment is out of the question, the state government should at least have diligently reviewed the available information," he adds, implying that this oversight proved costly.
Financial Crisis at Northvolt
Northvolt aims to manufacture battery cells for over one million electric cars annually in Heide, but the company has been grappling with financial difficulties for some time. In November, the company sought bankruptcy protection (Chapter 11 of US insolvency law) in the US, while also filing for insolvency in Sweden in March.
The potential costs for the federal government and the state of Schleswig-Holstein increase as Northvolt received around 600 million euros from state-owned KfW bank, with the federal government and the state each guaranteeing half. A convertible bond is a corporate bond that allows the holder to exchange these securities for shares within a given period.
Investigating State Government’s Actions
The SPD and FDP initiated a request for access to documents regarding Northvolt's risks, seeking to understand whether the state government kept parliament in Kiel informed of the company's potential risks before guaranteeing the convertible bond. The central debate revolves around the implications of this eventual bankruptcy for the state government's transparency and due diligence in the investment decision.
- The SPD accuses the Schleswig-Holstein state government of overlooking justified warnings from its own experts, as they claim a thorough risk assessment was not conducted before committing to a guarantee for Northvolt's convertible bond, ignoring potential financial risks.
- Kianusch Stender, an economist from the German Press Agency, remarks on the controversy surrounding Northvolt's battery factory in Heide, stating that the speed of promoting the project should not overshadow thoroughness, considering the billion-euro investment.
- economics and finance play a significant role in the ongoing discussions surrounding Northvolt's battery factory in Heide, as concerns about the company's financial stability, particularly its recent filings for bankruptcy protection in the US and Sweden, cast a shadow over the convertible bond guaranteed by the federal government and the state of Schleswig-Holstein.
