Heide's Battery Factory Crisis: Opposition Slams State Government for Rushed Northvolt Promotion
Critics urge cautious approach in Northvolt's endorsement - Opponents express worries over Northvolt initiative
The political heat in Schleswig-Holstein is escalating over the state government's handling of the planned Northvolt battery factory in Heide. Economist Kianusch Stender of the German Press Agency voiced concerns, saying, "With a billion-euro venture like Northvolt, speed shouldn't trump accuracy." The coalition allegedly neglecteddue diligence while managing the project's financing.
Economy Minister Claus Ruhe Madsen (CDU) countered the charges, emphasizing that the federal government commissioned a study from PwC to assess Northvolt's chances, risks, and default probability. The state, as the bond's guarantee for half, participated in the review but also conducted its independent evaluations.
"The documents and files clearly indicate that the state government meticulously weighed chances against risks. Given the risk-reward analysis, the state government concluded that the project's potential outweighed the risks, and proposed to the parliament for the guarantee on the convertible bond," said Madsen. The committee deliberated the project in over 30 meetings before unanimously approving it on January 25, 2024.
SPD's Critique
The opposition's criticisms stem from the release of state government documents in May 2023. Internal correspondence reveals pressure to answer the PwC study questionnaire promptly.
An email from the Economy Ministry on May 15, 2023, states, among other things, "...and the tight time frame should also be specified in more detail, though it shouldn't mean a mere 'smile and wave' for us, because we're essentially 'chasing after information.'"
In another email on the same day, the sender states, "In the end, only current risks and information gaps can be noted, with the final decision left to department heads or the HH legislature (the budget legislature - note of the editor). If the coming days don't bring any substantial insights, it's a decision left to the risks."
Ignoring Warnings?
Stender accused the state government of brushing aside adequate warnings from its own experts regarding the PwC study answer. "Just weeks before the cabinet agreed to shoulder a guarantee of such monumental magnitude, the state government chose to overlook sufficient responses to the PwC study's cautions."
It appears that crucial notes, particularly from the Economy Ministry, have been systematically disregarded, said Stender. "If the state government didn't take the time to conduct its own risk assessment, it should at least have carefully reviewed available data." Such decisions have proven to be a costly blunder.
Financial Troubles at Northvolt
Northvolt intends to produce battery cells for one million electric cars per year in Heide, but has been grappling with financial problems for some time. In November, the company filed for Chapter 11 bankruptcy protection in the US. In March, the company filed for bankruptcy in Sweden as well.
This crisis could yield hefty losses for the federal government and the state of Schleswig-Holstein. Northvolt has received approximately 600 million euros from KfW, a state-owned development bank. The federal government and the state each guaranteed half of the convertible bond. A convertible bond allows the holder the right to swap these securities for shares within a specific period.
- Northvolt
- SPD
- Due diligence
- State government
- Focus
- Crisis
- PricewaterhouseCoopers
- Negligence
- BMWi
- Billion-euro venture
- German Press Agency
- CDU
(Enrichment Data: In such large-scale ventures, due diligence typically consists of a thorough examination of financial, legal, and operational risks. A PwC study might play a role by delivering an analysis of the project's economic and financial ramifications. If allegations of negligence arise, it's crucial to examine the precise contents of the PwC study and the state government's responses to the identified risks.)
- The concern raised by economist Kianusch Stender from the German Press Agency is that the state government's haste in promoting the Northvolt battery factory could lead to a neglect of due diligence, particularly in the project's financing.
- In response to the allegations, Economy Minister Claus Ruhe Madsen (CDU) emphasized that a study from PricewaterhouseCoopers (PwC) was commissioned to evaluate Northvolt's chances, risks, and default probability, and the state participated in the review while also conducting independent evaluations.
- However, Stender's critique of the state government's handling of the PwC study questionnaire suggests that crucial notes, particularly from the Economy Ministry, might have been disregarded, which could potentially indicate a lack of thorough due diligence.
