CDPQ Invests CAD$200 Million in Northvolt
The Caisse de dépôt et placement du Québec is investing $200-million in a Swedish electric-vehicle battery maker that is about to break ground on a new manufacturing plant in the greater Montreal area.
With the investment in Northvolt AB, the Caisse joins a number of other Canadian pension plans in backing the company, whose new plant has been touted by the provincial government as a key part of its strategy to make Quebec a major battery-making hub.
Construction of the $7-billion plant is expected to start by the end of the year in Saint-Basile-le-Grand and McMasterville, outside Montreal. It is designed to have an annual production capacity of as much as 60 gigawatt hours, enough for about a million EVs, with equipment for cathode active material, cells and recycled materials. The company announced in late September that it had picked the location from a number of North American options.
Northvolt, which operates a major facility in Sweden, has signed deals to supply such automakers as Volkswagen, BMW, Scania AB, Volvo Cars and Polestar. Investment Management Corp. of Ontario, the Canada Pension Plan Investment Board and the Ontario Municipal Employees Retirement System have sizable investments in the company, as does BlackRock Inc., the world’s largest asset manager.
The battery industry is a “high-interest sector” for the Caisse because it is expected to expand rapidly as the transition to lower-carbon energy accelerates over the next decade, said Kim Thomassin, the public pension plan’s executive vice-president and head of Quebec, in a statement. The investment in Northvolt is in the form of convertible debt in the parent company.
Paolo Cerruti, Northvolt’s co-founder and chief executive of its North American division, said in the statement that the Caisse was involved in the process of wooing the company to Quebec for several months.
In September, Quebec Premier François Legault said the province was seeking to lock up more deals in the battery industry, having already clinched projects representing half of the government’s $30-billion target. Among those, General Motors Co. is partnering with South Korean battery material maker Posco Chemical Co. Ltd. on a new cathode factory in Bécancour, Que., and Ford Motor Co. is working with South Korea’s EcoProBM and SK On Co. Ltd. on a $1.2-billion plant that would produce EV battery materials in that same city.
The Canadian Press also reports CDPQ investing $200 million in Swedish battery company Northvolt:
Quebec’s pension fund manager is investing $200 million in Swedish company Northvolt AB which announced plans in September to build a factory for electric vehicle batteries near Montreal.
The investment by the Caisse de dépôt et placement du Québec will be in the form of convertible debt in the company.
Construction of Northvolt’s $7-billion plant in McMasterville and Saint-Basile-le-Grand, Que., is expected to start by the end of this year.
It is expected to have 30 gigawatt hours of annual cell manufacturing capacity when the first phase goes into production in 2026 with the ability to later double that figure.
The site will also include facilities for cathode active material production and battery recycling.
Kim Thomassin, executive vice-president and head of Québec at CDPQ, says the battery industry is a sector of high interest for the fund as it believes it will experience strong growth over the next decade.
CDPQ issued a press release earlier today saying it is investing in Northvolt:
CDPQ announces that it is investing around CAD 200 million (USD 150 million) in Northvolt AB, a leading integrated battery platform focused on the R&D, manufacturing and recycling of sustainable battery cells and systems.
This financing, in the form of convertible debt in the parent company located in Sweden, will contribute to the realization of the Northvolt Six project in Québec announced this fall.
“The battery value chain is a high-interest sector for CDPQ, and with a favourable impact on the energy transition, we believe it will experience strong growth over the next decade, which we expect will benefit our depositors,” said Kim Thomassin, Executive Vice-President and Head of Québec at CDPQ. “This sector is promising for Québec’s economic development and we want to contribute to that.”
“CDPQ has been involved in the process for several months, actively contributing in establishing our future plant in Québec. We are delighted to partner with such a major, long-term institutional investor that is committed to Québec’s economic and energy development,” added Paolo Cerruti, Co-Founder of Northvolt and CEO of Northvolt North America. “Northvolt continues to integrate into the economic and social fabric of Québec, and the CDPQ’s investment in Northvolt is further evidence of this.”
With proven technology validated by its customers, who are major sustainable mobility manufacturers, Northvolt operates Europe’s first homegrown gigafactory in Sweden and is currently developing other projects to expand in Europe, in addition to the project announced recently in Québec.
Groundwork for the construction of the Northvolt Six facility—a fully integrated battery factory in Saint-Basile-le-Grand and McMasterville, outside of Montréal—is expected to start by the end of 2023. When fully built, the factory will have an annual production capacity of up to 60 GWh, with facilities to manufacture cathode active material, cells and recycled materials, effectively closing the battery loop on site.
I have been waiting for an announcement on CDPQ investing in Northvolt for quite some time and it finally happened.
To be truthful, I was expecting a US$500 million figure but CAD$200 million financing in the form of convertible debt is fine for now.
I have covered Northvolt a few times on this blog.
The company is a powerhouse, it's quickly establishing itself as the global manufacturer of EV batteries and true to form, it takes sustainable investing very seriously, recycling material to produce batteries.
From the large Canadian pension funds, OMERS has taken the lead, co-leading a US$2.75 billion ($3.3 billion) private placement to raise equity for the Swedish battery maker two years ago.
This summer, Northvolt raised another US$1.2 billion and both CPP Investments ($55 million) and OMERS were part of that and in June, IMCO invested $400 million in the battery producer.
Now, there are a lot of reasons why Northvolt chose to establish a plant in Quebec, cheap hydroelectricity being one of them along with hefty government subsidies:
When fully operational, the factory will be known as Northvolt 6 and is expected to employ 3000 workers. It will have an annual capacity of 60 GWh when it reaches full production in 2026. Construction of the first phase will begin before the end of this year.
To seal the deal, the Canadian government and the government of Quebec province each agreed to kick in about $1 billion. As a result, Northvolt will be the beneficiary of about the same economic incentives it would have been eligible for had it chosen to build the factory in the US.
“Canada is mirroring those measures pretty much one to one,” Paolo Cerruti, a former Tesla executive and co-founder of the Swedish company, told the New York Times in an interview. He also said he will oversee the operation of the factory when it is completed.
The location chosen by Northvolt has other benefits as well. Quebec has an abundance of zero-emissions electricity available, thanks to its access to hydroelectric power. Northvolt is committed to making the “greenest” batteries in the world and using 100% zero-emissions electricity to operate its factories will be a big part of achieving that goal.
Peter Carlsson, CEO and co-founder of Northvolt, said, “In the seven years since Northvolt was founded, we have pursued a singular goal — to establish a new, sustainable model for battery manufacturing. Today, we are expanding our ambitions by bringing Northvolt to Canada.”
Access to lithium is a big part of the equation, too. Paolo Cerruti said, “We would like to have as much lithium as possible from Canada.” A lithium mine near La Corne, Quebec, about 350 miles northwest of Montreal, began operations this year. Of course, the biggest benefit of all is that batteries made in Canada with materials from Canada will help the cars and trucks who use them qualify for the federal EV tax incentives contained in the Inflation Reduction Act.
Cerruti said Northvolt has lined up customers for the batteries made at the new Quebec plant but declined to name them. In Europe, Northvolt makes batteries for BMW, Volkswagen, and Volvo. The Quebec factory will also have a battery recycling component. Northvolt says that eventually half of the lithium, cobalt, nickel, and other raw materials required for making batteries will come from the recycling part of the factory.
In a Northvolt press release, Paolo Cerruti said, “We have in Northvolt Six enormous potential, not only to rapidly expand our ability to bring sustainable batteries into markets of North America, but to accelerate Quebec’s emergence as a key actor in the global energy transition. With its unique access to renewable power and raw materials, we see this as the ideal base of operations for Northvolt’s first gigafactory outside of Europe. We look forward to engagement with all local stakeholders and the province, to make Northvolt Six a textbook example of sustainable investment.”
I know some people were miffed as to why the federal and Quebec government kicked in about $1 billion to entice Northvolt to set up a plant in Quebec but this is actually an example of an intelligent subsidy, one that will pay itself over the next two decades.
Like it or not, the world is shifting to EVs and Northvolt and other large companies are going to be part of this energy transition.
This is why it's a no-brainer for OMERS, IMCO, CPP Investments and now CDPQ to finance this explosive growth.
Just remember this, Northvolt is an incredible company in every respect and it's already established itself as a global powerhouse in producing EV batteries.
CDPQ did the right thing investing in it and I expect more follow-on investments in the future.
Below, Swedish-based Northvolt has announced a major investment in Canada in an EV battery manufacturing hub. The company will invest $7 billion in a facility in Québec, which will include a cathode active materials facility, battery cell manufacturing facility and a battery recycling operation. Northvolt was attracted by Canada’s advantages for investment, including clean energy, natural resources and world-class talent.
Invest in Canada was pleased to work with Northvolt throughout the investment process. It welcomes this important investment that will create some of the greenest batteries in the world, 3,000 quality jobs and further reinforce Canada’s momentum in building an end-to-end EV supply chain.
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