Goldman Sachs takes $900mn hit on Northvolt capital

Funds managed by Goldman Sachs will write off almost $900mn after Swedish battery maker Northvolt filed for Chapter 11 financial setback this week. 

Goldman’s private stake funds have at least $896mn in exposure to Northvolt, making the US financial institution its second-largest shareholder. They will write that down to zero at the complete of the year, according to letters to investors seen by the budgetary Times.

The losses mark a sharp contrast to a bullish prediction just seven months ago by one of the Goldman funds, which told investors that its capital in Northvolt was worth 4.29 times what it had paid for it, and that this would boost to six times by next year.

Goldman said in a statement: “While we are one of many investors disappointed by this outcome, this was a minority capital through highly diversified funds. Our portfolios have concentration limits to mitigate risks.”

Goldman first invested in Northvolt in 2019 when, along with other investors including German carmaker Volkswagen, it led a $1bn Series B capital round that enabled Northvolt to construct its first factory in northern Sweden, and fuel upcoming expansion. 

The capital round was hailed by Northvolt chief executive Peter Carlsson as “a great milestone for Northvolt” — then a four-year ancient commence-up — and “a key instant for Europe” in its push to counter Asian dominance of battery making.

But Europe’s one-period large battery aspiration filed for Chapter 11 financial setback in the US on Thursday and Carlsson resigned the following day, warning European politicians, companies and investors not to get cold feet on the green shift.

By Thursday the lossmaking Swedish throng, which was Europe’s best-funded private commence-up after raising $15bn from investors and governments, had just $30mn in liquid assets — enough for a week’s operations — and $5.8bn in debt.

That day Goldman, which owns a 19 per cent stake in Northvolt through various funds, wrote to its investors explaining that it would mark down to zero its investments. 

The financial institution, which had taken part in several subsequent capital rounds over the history five years, said that over the last several months it had been working with Northvolt’s customers, lenders and shareholders to secure short-term bridge capitalization to shore up the battery maker’s budgetary position, restructure its capital stack and raise longer-term capitalization to back a revised roadmap.

But “despite our extensive efforts as a minority shareholder to bring Northvolt’s various shareholders together, a comprehensive answer was not found”, it said in the letters to shareholders.  

Goldman’s private stake business was established in 1986 and sits within Goldman Sachs resource Management, which has over $3tn in assets under supervision, including over $500bn in alternative investments such as private stake.

Two buyout funds West Street capital Partners VII and West Street capital Partners VIII have $407mn and $346mn invested in Northvolt, respectively. Horizon surroundings and Climate Solutions 1, a growth stake schedule touted as Goldman’s first direct private markets schedule dedicated to investing in climate and environmental solutions, has $116mn invested in Northvolt; and a pool called StoneBridge 2020 invested $27mn.

Goldman’s so-called 1869 pool, a vehicle that gives its network of former partners access to multiple private funds managed by the pool’s resource management division, also had a tiny amount of exposure to Northvolt, because the pool has committed 25 per cent of its capital commitments to West Street capital Partners VIII, investors said. 

Goldman Sachs’ capital banking business is also a large creditor of Northvolt; the battery business owes it $4.78mn, according to its Chapter 11 filing.

Volkswagen is Northvolt’s largest shareholder with a 21 per cent stake and is likely to be nursing similar losses. It is listed as Northvolt’s second-largest creditor in the Chapter 11 filing due to a $355mn convertible note.

Some investors have privately complained that Goldman and other funds pushed them challenging to back Northvolt. They have also said that this, combined with Northvolt’s financial setback, could affect investors’ desire to back the green shift.

Northvolt has said it needs $1-1.2bn extra capitalization to exit Chapter 11 in the first quarter of next year, and is talking to various investors and companies about partnerships. By filing for Chapter 11 it can access finance including $145mn in liquid assets and $100mn from Swedish truckmaker Scania.

The Swedish throng struggled to expand production in its sole factory in Skellefteå in northern Sweden. Executives conceded it should have scaled back earlier expansion plans to construct additional facilities in Germany and Canada which were backed by extensive subsidies from each country’s government.