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Europe’s leading battery maker raises the region’s largest green loan cementing its position as its best funded start-up

Northvolt cemented its position as Europe’s best-funded start-up as the Swedish battery manufacturer raised $5bn in debt financing to help it expand its first gigafactory and build a recycling facility on the same site.

It is the largest green loan raised in Europe so far, and underlines the insatiable need for capital that has forced the region’s leading battery maker to ready itself for a possible stock market listing. Executives say the Swedish industrial start-up is ready to list if market conditions improve but investors have said it will be tricky so long as the group remains heavily lossmaking.

Confirming a story from the Financial Times last March that it was looking to raise $5bn in debt, Northvolt said on Tuesday that the funding — which includes the refinancing of a $1.6bn debt package from July 2020 — was provided by 23 banks as well as the European Investment Bank and the Nordic Investment Bank.

Northvolt has now raised more than $13bn in debt and equity as it looks to build four large factories in Sweden, Germany and Canada by the end of the decade.

Peter Carlsson, Northvolt’s chief executive and co-founder, said: “This financing is a milestone for the European energy transition.” He added that it would enable the company to realise the full potential of Northvolt Ett, its first gigafactory and “demonstrates that circular, sustainable business practices are fundamental to success in today’s industry”.

Northvolt Ett, located just below the Arctic Circle in northern Sweden, first started producing batteries in late 2021 but has been hit by a series of delays and accidents, complicating production.

Customers, who have together placed $55bn of orders with Northvolt, have been left waiting for batteries from the plant, especially Swedish truckmaker Scania.

Losses at the start-up for the first three quarters of 2023 increased eight-fold from the year before to almost SKr11bn ($1.1bn). Executives have warned that the construction of future gigafactories will demand their own multibillion financing packages too.

Northvolt will also use the debt financing to fund its adjacent recycling plant, Revolt Ett, the first time a company outside Asia has placed such a facility next to battery manufacturing. Recycled battery materials have a carbon footprint that is 70 per cent lower than mined minerals, Northvolt claims.

Northvolt received the highest “dark green” rating from Cicero, a Norwegian consultancy that offers grades for the environmental quality of debt offerings.

“I’m proud to see how our ambition to mass produce the world’s greenest battery attracts top-tier financial partners, as global capital is looking to invest in electrification and climate change mitigation,” said Emma Nehrenheim, chief environmental officer.

Northvolt was advised by BNP Paribas, Allen & Overy and Mannheimer Swartling.

Startup will use cash to expand production for customers including Volkswagen and BMW

One of the world’s most valuable battery startups is raising $3.4 billion in debt from the European Union and a group of banks including JPMorgan Chase JPM -0.73%decrease; red down pointing triangle, accelerating a race to build more batteries outside China and take advantage of a tidal wave of clean-energy subsidies.

Europe’s Northvolt plans to use the funding to grow battery production at a factory in northern Sweden for customers such as Volkswagen VOW3 -0.45%decrease; red down pointing triangle and BMW BMW -1.37%decrease; red down pointing triangle. It also plans to expand a recycling facility next door that will convert scrap metal and old batteries into reusable battery materials.

The funding is one of the largest transactions for a clean-energy company in recent years. It highlights a push from investors and policymakers to channel billions of dollars into making batteries that can power electric cars and store energy when the wind isn’t blowing and sun isn’t shining to speed the shift away from fossil fuels.

China controls swaths of the battery supply chain from metals processing to cell assembly, a concern for Western countries that are throwing billions of dollars in tax credits, loans and grants at companies to kick-start their own supply chains. The 2022 U.S. climate law has driven other countries to bolster their own subsidies to attract clean-energy investments.

The European Union’s investment bank has now contributed close to $1 billion toward Northvolt’s Sweden factory, part of its push to establish a homegrown battery company.

“Many countries have recognized that this is a critical infrastructure piece in the green transition,” Peter Carlsson, Northvolt’s chief executive and a former Tesla supply-chain manager, said in an interview.

Northvolt is also refinancing $1.6 billion in debt that it had raised previously. The company is accelerating battery production at its factory near the Arctic Circle in the next few years with the intention of making enough batteries annually to power several hundred thousand cars. One of Northvolt’s selling points is that it runs its factories on renewable power. That has helped fuel some $55 billion in battery orders from big European automakers.

Recycling battery materials back into the supply chain to reduce emissions has also become a hot area of investment. Recycling companies including a startup launched by a former Tesla chief technology officer have attracted billions of dollars in recent years.

Founded in 2016, Northvolt is establishing new battery factories in Germany and Montreal. The European Union recently approved a nearly $1 billion incentive package for the German plant, while the Canadian and Quebec governments are putting about $2 billion into the Montreal project.

The subsidies illustrate how concerns about the world’s reliance on Chinese batteries and the climate law known as the Inflation Reduction Act are driving a global competition for investments from companies such as Northvolt. The U.S. law tied tax credits for electric cars to how much material comes from domestic sources or trading partners.

The climate law also turbocharged a U.S. government clean-energy lending program that is pouring billions of dollars into domestic battery production.

Northvolt’s new funding includes other big banks such as Citigroup and BNP Paribas. The company has now raised about $13 billion in equity and debt, prompting speculation on Wall Street about when it might pursue a public listing.

Carlsson said the company is preparing to go public when market conditions are more attractive but that the new funding shows why Northvolt is in no rush while it scales production.

“2024 and 2025 will be crucial years,” he said.

The companies now expect the deal to close in the first half of Kroger’s fiscal 2024

The proposed merger of U.S. grocery giants Kroger KR 0.39%increase; green up pointing triangle and Albertsons ACI -0.79%decrease; red down pointing triangle, and sale of assets to C&S Wholesale Grocers, will be later than previously anticipated as the companies continues discussion with regulators.

In a joint statement on Monday, the companies said that due to continued discussions with the Federal Trade Commission and individual state Attorneys General, they now expect the deal to close in the first half of Kroger’s fiscal 2024.

Previously, the companies expected to close the transactions early in the calendar year. Kroger reported its third quarter results at the end of November.

The companies said they remain in active and ongoing dialogue with the regulators regarding the proposed merger and divestiture plan.

Kroger in October proposed to acquire Albertsons. Early in September, the pair entered into a definitive agreement with C&S Wholesale Grocers for the sale of select stores and other assets as the two grocery giants in an effort to complete their planned tie-up.

In response to the new timeline, the companies said that “while this is longer than we originally thought, we knew it was a possibility and our merger agreement and divestiture plan accounted for such potential timing.”

Kroger said it plans to invest $500 million to reduce prices beginning the first day the merger is complete, and it has committed to protecting union jobs, with no plans for store closures or laying off frontline associates. Among other investments, Kroger said it will invest an incremental $1 billion to raise wages and comprehensive benefits for all associates post-close.

The market rally has run out of steam, prompting concerns about whether stocks ran too far too fast

The blockbuster stock market rally stalled once the calendar flipped to 2024.

Some of the big tech stocks that drove the market’s advance last year appear to have run out of gas, government-bond yields have risen and inflation might not be cooling as quickly as some investors had hoped. After a rocky start to the month, the S&P is clinging to a 0.3% advance in January.

Investors say a decline in enthusiasm is normal after a stretch of robust gains like those that capped 2023. They also say they have many questions about the path of the economy and interest rates that will be key to discerning the market’s trajectory this year.

These are some of the biggest ones:

Can the stock rally broaden beyond the Magnificent Seven?

Stocks jumped out of the gate last year to the surprise of almost everyone. The problem? Just seven big tech stocks—Apple, Microsoft, Alphabet, Amazon.com, Nvidia, Tesla and Meta Platforms—were responsible for most of the S&P 500’s gains. That sparked worries about the health of the rally and whether the market would be vulnerable to a downturn if a few of the heavyweights faltered.

This year, many investors expect a revival in shares in beaten-down areas of the market, a bullish sign among strategists who view expanding market breadth as a signal that a rally has legs.

Investors have reason to be hopeful. Since the stock market’s recent low on Oct. 27, the small-cap-focused Russell 2000 has gained 19% and the equal-weighted S&P 500, which gives the same status to the smallest and largest companies in the index, has added 17%. Both indexes have outpaced the traditional S&P 500’s 16% advance.

The S&P 500 sectors off to the strongest start in January are healthcare, communication services and consumer staples, all up at least 1.2%.

Can we expect stocks to keep climbing once the Fed cuts interest rates?

Stocks got off to a bumpy start in January after ending 2023 with a bang. That prompted questions about whether markets had run too far too fast and if the Fed’s expected rate cuts were already priced in.

Stocks typically struggle to establish a strong footing ahead of the first rate cut in an easing cycle. Since the 1970s, the S&P 500 has noted a median decline of 1.8% in the three months leading up to the first rate cut, according to Ned Davis Research. The picture improves after that, with stocks gaining an average of about 20% over the course of an easing cycle, NDR said.

“Seems like what we did in December is priced in an awfully good outcome for a soft landing,” said Joe Kalish, chief global macro strategist at NDR. “Not saying it’s not possible, but it could be difficult to pull that off and keep the unemployment rate from rising and have inflation come down.”

Wait, is a recession still in the cards?

Many economists have lowered their estimates on the probability of a recession. That is mostly thanks to a decline in inflation, strength in the labor market, cooling wage growth and strong consumer spending.

But Fed policymakers expect the economy to grow at a slower rate this year compared with last and for the jobless rate to rise to 4.1% by the fourth quarter. As their pandemic-era savings are depleted, consumers could pull back on spending as well.

Typically, the effects from monetary-policy tightening take time to filter through the economy. Since the late 1950s, an average of 23 months have passed between the initial rate increase of a hiking cycle to the beginning of an economic downturn, according to Jeff Schulze, head of economic and market strategy at ClearBridge Investments. This hiking cycle started 21 months ago.

“Gosh, we got ahead of ourselves in thinking that because it was the fastest and highest rate-hiking cycle in our recent history, it would lead to the fastest and deepest recession,” said Jeff Klingelhofer, co-head of investments at Thornburg Investment Management. “That didn’t happen. But just because it didn’t happen doesn’t mean we’re not on target for still a pullback.”

Will this be a good year to buy a home?

The 30-year fixed mortgage rate peaked near 8% last fall, putting homeownership out of reach for many Americans. It has since fallen to 6.66%, according to mortgage giant Freddie Mac, and should keep dropping if the Fed sticks to its forecasts.

In December, the central bank penciled in three interest-rate cuts this year, and traders in the derivatives market are betting that rates fall even more. That would offer a respite to would-be home buyers who have been sidelined by high borrowing costs and allow those locked in at higher rates to refinance.