Questionable Governance in Northvolt Support: SPD Slams Schleswig-Holstein Over Financing Missteps
Critics Explore Vigilance Concerns Surrounding Government's Endorsement of Northvolt - Opposition voices rising over concerns regarding the Northvolt undertaking
The SPD has laid the blame on Schleswig-Holstein's state government for negligence in promoting the Northvolt battery factory in Heide, with economist Kianusch Stender of DPA stating, "In a billion-dollar project like Northvolt, the principle of 'speed over accuracy' shouldn't apply." The coalition is accused of carelessly handling the project's financing.
CDU's Economy Minister Claus Ruhe Madsen denies these allegations, citing a study by PwC commissioned by the federal government to assess the chances, risks, and default probability of the convertible bond for which the state serves as a guarantor for half. However, an email correspondence within the state government, released in May 2023, indicates a rushed response to the questionnaire on the PwC study, potentially disregarding valuable warnings from their own experts.
SPD member Stender criticizes the state government for neglecting justified warnings and insufficiently answering the questionnaire on the PwC study before taking on a guarantee of such significance. It seems critical notes, particularly from the Economy Ministry, were willfully neglected, according to Stender. He emphasizes, "If you don't even conduct your own risk assessment, you should at least thoroughly review available information."
Northvolt, the company aiming to build battery cells for a million electric vehicles annually, is suffering from financial issues. In November 2023, the company filed for bankruptcy protection in the US, while in March it filed for insolvency in Sweden. If the crisis proves costly for the federal government and the state of Schleswig-Holstein, it was due to the fact that Northvolt received €600 million from the state-owned development bank, KfW, and various other funds. Additionally, Northvolt had been granted around €700 million from the federal and state governments through the EU Commission, with €137 million attributed to Schleswig-Holstein and €564 million to the federal government.
As the German Federal Audit Office investigates Northvolt's claims and financial arrangements involving both the federal and state governments, concerns have emerged about whether proper due diligence and risk evaluation were conducted before underwriting significant financial exposure. The risk assessment applied by Schleswig-Holstein before guaranteeing the convertible bond has not been publicly disclosed, but the Audit Office's investigation implies doubts about the adequacy of the risk evaluation prior to the financial guarantee.
[1] German Federal Audit Office Investigation[2] European Commission Funding Details
The state government’s questionable risk evaluation and guarantee decisions are now under formal review, raising concerns about the financial stability and risk exposure associated with backing Northvolt's battery factory project.
- The SPD has expressed concerns about Schleswig-Holstein's community policy, as they question the state government's handling of the Northvolt battery factory project, particularly with regard to financing.
- As Northvolt struggles financially and faces bankruptcy protection in the US, the state's involvement in its vocational training and development is under scrutiny, with industry experts criticizing the state government's, potentially hasty, evaluation of risks before guaranteeing significant financial exposure.
- The financial implications of Schleswig-Holstein's support for Northvolt's battery factory project could have far-reaching effects, stretching into the realms of finance, business, politics, and general-news, as the German Federal Audit Office reviews the project's claims and financial arrangements involving both the federal and state governments.
