The Investment Management Corporation of Ontario (IMCO) has injected $400 million into Swedish battery maker Northvolt, supporting its lithium-ion battery production expansion and a potential IPO. Since 2017, Northvolt has raised over $8 billion in debt and equity and is currently valued at $12 billion. The company is discussing an IPO with banks that could value it at over $20 billion. Northvolt also plans to invest billions of euros in an electric vehicle battery plant in Germany. IMCO’s investment aligns with its focus on the energy transition and global supply chain restructuring. The company manages over $73 billion in assets, and its investment in Northvolt is its largest European deal.
- Northvolt has become one of Europe’s leading battery producers in a mere six years.
- Supported by companies like BMW and Volkswagen, it is a key player in the energy transition.
- This investment is likely a step towards a future IPO of Northvolt.
Northvolt’s rapid growth and plans for expansion
Northvolt, backed by investors such as EIT InnoEnergy, BMW and Volkswagen, has become Europe’s leading battery manufacturer in just a few years. The company’s first gigafactory in Sweden has already delivered battery cells and has secured over $50 billion worth of contracts from key customers like BMW, Volkswagen, and Volvo Cars. With a mission to produce sustainable, high-performance lithium-ion batteries, Northvolt is contributing to the transition to a decarbonized future in Europe.
Looking to expand its operations, Northvolt has announced plans to establish its third gigafactory, Northvolt Drei, in Heide, Schleswig-Holstein, Germany. Scheduled to start production in late 2025, the facility will have an annual capacity of 60 GWh, enough to produce batteries for approximately one million electric vehicles. The strategic location of Heide offers access to Germany’s cleanest energy grid, with abundant wind power and clean energy interconnections with Denmark and Norway.
IMCO’s investment strategy and its impact on Northvolt
IMCO’s $400 million investment in Northvolt comes from convertible notes, providing regular interest payments and downside protection for the Canadian pension fund. This move is part of IMCO’s strategy to diversify its assets away from North America, focusing more on investments in continental Europe and the UK. The strong policy support for electric vehicles and local manufacturing in Europe makes Northvolt an attractive investment for IMCO, which manages more than $73 billion in assets across various asset classes.
Northvolt’s competitive advantage, long-term contracts, and lower-carbon supply chain were assessed by IMCO’s infrastructure and public equities teams. The investment aligns with IMCO’s focus on themes related to the transition to a lower-carbon economy and reshaping global supply chains. IMCO plans to expand its investment team as it seeks more opportunities overseas, collaborating with investment partners like Blackstone, Brookfield, and Carlyle.
Northvolt Drei and support from the European Union
Northvolt’s commitment to building its new gigafactory in Germany, rather than the United States, was influenced by increased subsidies from the European Union (EU). The EU is ramping up its efforts to compete with incentives provided by the US Inflation Reduction Act. If approved, the German government will provide more than half a billion euros in subsidies to Northvolt, making it the first project to receive such funding under the EU’s Temporary Crisis and Transition Framework.
Northvolt Drei aims to produce the cleanest batteries in continental Europe by prioritizing sustainability and sourcing a significant portion of its raw materials from recycled battery metals. The company has set a goal to source 50% of raw materials from recycling by 2030. To achieve this, the factory plans to establish an on-site battery recycling plant to efficiently reuse byproducts and provide a sustainable solution for end-of-life electric vehicle batteries.
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