Northvolt crisis: Habeck and Scholz defend subsidies

The red-green federal government is defending itself against criticism of its subsidy policy in light of the crisis at Swedish battery manufacturer Northvolt. Chancellor Olaf Scholz (SPD) said during a government questioning in the Bundestag, with regard to the development of electromobility, that strategic components must be manufactured in Europe. Therefore, it is correct that the federal government promotes the construction of battery factories. "We will continue to do that." There is no reason to stop.

Vice Chancellor and Minister of Economy Robert Habeck also defended state subsidies for companies. "The core reason is the resilience of the European and German economy," said the Green politician before a questioning in the Bundestag's budget committee. Germany is 80 percent dependent on China for battery production. The subsidy programs also largely originated from the previous government - under Chancellor Angela Merkel (CDU). She made the right decisions.

Northvolt in Crisis 

The financially troubled Swedish battery manufacturer Northvolt has filed for creditor protection in the USA. The company declared a restructuring process under Chapter 11 of the US bankruptcy law. According to the company, its battery plant being built in Heide, Schleswig-Holstein, is not affected. The crisis could become costly for the federal government and the state of Schleswig-Holstein. The struggling company has received around 600 million euros from the state development bank KfW, for which the federal and state governments each provide 50 percent guarantees.

Scholz said it was very regrettable that Northvolt's business plans were not currently developing in Europe or Germany as hoped. Habeck said many other companies have undergone restructuring and subsequently returned to the market successfully. There is indeed a chance that Northvolt will reposition itself, restructure, and the funds will be retained.

Budget committee addresses the topic

The Ministry of Economy requested the budget committee to approve an extraordinary expenditure of around 620 million euros. This is intended to fulfill the federal government's legal obligations from an allocation deal with the state development bank KfW in connection with the subscription of a convertible bond issued by Northvolt in December 2023. Even if the German project company in Heide is not directly affected, with the opening of the Chapter 11 process, the KfW's repayment claim from the convertible bond became immediately due, according to a letter to the budget committee.

Ministry sources said that the convertible bond is a market-standard, non-subsidized instrument. This is evidenced by the fact that numerous well-known institutional and industrial investors, as well as pension funds, had subscribed to the Northvolt AB convertible bond and assessed the risk in the same way. A total of 3.3 billion US dollars (around 3.1 billion euros) was subscribed. According to sources, Northvolt had high double-digit billion-value customer orders from top addresses in the automotive industry.