Question Period Note: STRATEGIC INNOVATION FUND (SIF) AND THE NORTHVOLT PROJECT

What impact (if any) would Northvolt AB’s filing from bankruptcy protection in the US, its financial challenges and layoffs have on its project in Canada?

• The Government of Canada is committed to supporting Northvolt to build a new end-to-end electric vehicle (EV) battery facility in Quebec.

• Northvolt’s parent company, Northvolt AB, filed for bankruptcy protection. Northvolt North America is not part of the filing and continues its operations.

• The company has indicated it remains committed to the success of its project in Canada.

• Northvolt’s project will help position Canada as a global leader in the production of electric vehicle batteries and support the development of a sustainable domestic battery sector.

• To date no support, in any form, has been disbursed to the company by the Government of Canada.

On September 28, 2023, Prime Minister Trudeau and Minister Champagne announced a Strategic Innovation Fund (SIF) investment of up to $1.34 billion dollars to Northvolt Batteries North America Inc. to help build a new end-to-end electric vehicle (EV) battery facility on land that spans Saint-Basile-le-Grand and McMasterville, Quebec.

Canada also announced its commitment to provide production support to Northvolt to mirror the incentives under the U.S. Inflation Reduction Act’s (IRA) Advanced Manufacturing Production Credit, with the total amount of support depending on the level of production at the Canadian facility.

Government production incentives will apply only to the batteries that Northvolt produces and sells from its Canadian facility, in line with the conditions in previous agreements with other battery plants. They will be up to C$4.6 billion, of which one-third is to be paid by the Quebec government. This is commensurate with the US$35 per kWh for battery cells produced and sold, offered via the Advanced Manufacturing Production Credit (AMPC) in the U.S. Inflation Reduction Act (IRA). Canadian production incentives would be adjusted if any changes occur to the IRA.

On September 9, 2024, Northvolt announced it was taking initial steps to streamline its global operations to slow cash outflows. The company stated it would focus resources on battery cell manufacturing capacity whilst reducing costs in other areas of its business, namely halting a battery materials project in Borlänge, Sweden. Until as recently as mid-November 2024, the company has had operational and quality issues impacting its production ramp up, with the company consistently missing internal weekly production targets. With the cancellation of a major contract with BMW earlier in 2024, the company has been producing cells mostly for truck maker Scania, as well as Audi and Porsche (all subsidiaries of major Northvolt shareholder Volkswagen Group).

On September 23, 2024, Northvolt announced that it will be laying off 20% of its workforce, including 1,600 employees across its three plants in Sweden.

On November 21, 2024, parent company Northvolt AB filed for Chapter 11 bankruptcy protection in the US. The company has stated that the Quebec project will continue to operate as usual outside of the Chapter 11 process. Canada and Quebec are closely monitoring the situation. Following the news of filing for bankruptcy protection, the CEO and co-founder, Peter Carlsson, announced that he is stepping down, though he remains a Member of the Board.

RESPONSIVE IF PRESSED ON NORTHVOLT FINANCIAL SITUATION IMPACT ON ITS PROJECT IN CANADA:

• Northvolt AB is taking steps to streamline its global operations to reduce costs.

• As part of its strategic review, the company is focusing resources on battery cell manufacturing capacity and on its three projects in Sweden, Germany and Canada.

• As part of the filing for bankruptcy protection, the company indicated that the Canadian project would be delayed. The company has not specified any changes to its project scope in Canada.

As the federal government has not made any disbursement to Northvolt, ISED is not expected to be involved in proceedings related to the financial restructuring.
• The government will continue to monitor the situation closely to determine the impacts on the Canadian entity and its project.

• As long as Northvolt has plans to build a factory in Quebec, the Government of Canada will continue to work with the company to find a path forward that works for all parties.