Northvolt: Caisse thought its $200 million investment was risky

Caisse de dépôt et Placement disclosed Thursday that it considers its $200 million loan to Northvolt a high-risk investment.

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“The Caisse has analyzed this investment with the risk/return framework of venture capital, which applies to projects or companies in development,” it indicated in an email to the firm. Newspaper.

“Since we are dealing with an emerging company in a growing and developing sector, the level of risk attributed to the file is not the same as that of a mature company,” she added.

Venture capital is a form of investment that allows young, usually unprofitable companies to obtain financing for innovation projects where the probability of success is uncertain.

Founded in 2015, Northvolt is a Swedish startup that has raised more than US$10 billion (CA$14 billion) to date, primarily in the form of venture capital.

For an investor like the Caisse, venture capital offers higher risks than traditional investment, but also more substantial return potential.

“hard process”

The company also confirmed Newspaper “Transaction in Northvolt Submitted to Investment-Risk Committee”.

“All investments [de la Caisse]Without exception, go through a rigorous risk process that evaluates transactions from various angles (financial, tax, ESG, legal, technology, etc.),” the firm said.

Last year, it flatly rejected a request for access to information from the Caisse Newspaper Seeking documents detailing the approval process for the company's investment in Northvolt, citing primarily confidentiality reasons.

Discretionary investment

Also note that the Ministry of Finance's $267.7 million investment in Northvolt in December 2023 was not made as part of a specific government program.

Rather, it is a discretionary investment made under an article of the Investment Quebec Act relating to “projects of significant economic interest to Quebec”. These projects are generally considered risky.

Quebec granted Northvolt a $240 million guaranteed loan that allowed it to purchase a large plot of land in Monterrey where the company plans to build its facilities.

In total, Quebec has committed to paying Northvolt a total of $1.37 billion in financial aid, while Ottawa has pledged $1.34 billion. To this must be added “production incentives”, which will reach $4.6 billion (two-thirds assumed by Ottawa and one-third by Quebec).