Europe’s big battery hope Northvolt in talks to secure over $5bn in funding

Swedish start-up Northvolt is in talks to secure more than $5bn of financing to pursue its goal of becoming Europe’s biggest battery manufacturer.

The company is negotiating with a number of banks to raise the debt financing and an agreement could be reached later this year, according to people with knowledge of the details. Northvolt declined to comment.

Northvolt was founded in 2017 and has become the main European challenger to the big Asian producers that dominate the industry such as CATL of China and South Korea’s LG.

The Swedish company produced the first battery from its European factory just south of the Arctic Circle in Sweden at the end of 2021. The plant is planned to eventually cover space equivalent to 70 football pitches.

Northvolt is also about to begin construction of a second “gigafactory” jointly with Volvo Cars in Gothenburg and will decide next month whether to build a third plant in Germany or in the US. A large-scale recycling facility next to its first plant in Skellefteå in northern Sweden will begin operating this year and it is also boosting production at a battery systems factory in Poland.

The group, which is talking to banks about a stock market listing as soon as next year at a valuation of about $20bn, has raised more equity financing than any other unlisted start-up in Europe.

But its current fundraising would be a significant step up. It raised a $1.1bn convertible note in July, taking the total amount of debt and equity financing it has raised since its founding to $8bn. Executives say it is constantly talking to investors about raising more for its future projects.

The Swedish group, whose biggest shareholders include Volkswagen, Goldman Sachs, BMW and Baillie Gifford, is one of the companies on the front lines of an transatlantic subsidy battle.

It had previously announced it would build its next gigafactory in Germany but in recent months has said it is considering whether to postpone that and build in the US instead, attracted by subsidies provided by the country’s Inflation Reduction Act. Northvolt told policymakers in Brussels that US subsidies were worth at least €8bn per factory. VW earlier this month accelerated plans for a plant in North America ahead of one in eastern Europe.

Northvolt’s chief executive Peter Carlsson has previously told the FT that the IRA was “moving momentum a lot from Europe to the US”, with not just Northvolt but also Asian battery companies and suppliers considering moving investments.

The success of Northvolt contrasts with the UK’s battery manufacturing hopeful Britishvolt, which collapsed into administration this year after running out of funding.

Additional reporting by Arash Massoudi