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Northvolt's financial woes cast shadow over green industry

boom

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Local authorities call on government to share risk

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$100 billion of investment at stake, Sweden's regional

growth

agency says

By Simon Johnson

LULEA, Sweden, Dec 18 (Reuters) - Sweden's local

authorities, rattled by battery-maker Northvolt's fight for

survival and the potential fallout for taxpayers, are seeking

increased financial support from the central government for the

country's transition to green industry.

Europe's electric vehicle battery champion filed for U.S.

Chapter 11 bankruptcy protection last month with debts of $5.8

billion as the EU's energy transition falters, sending

shockwaves through Skelleftea in northern Sweden, home to its

Northvolt Ett factory.

Sweden has led Europe's efforts to shift from fossil-fuel

based industries to non-polluting energy, driven by cheap,

carbon-free electricity and abundant raw materials mainly in the

far north of the country.

Local governments, already among Europe's most indebted due

to high social and healthcare costs, however say they are

bearing much of the financial burden for new infrastructure

needed to attract and support these investments.

The country's Agency for Economic and Regional Growth projects

that around 1.1 trillion crowns ($104 billion) of investment is

in the pipeline in northern Sweden. The region is rich in high

grade iron ore, gold as well as zinc, copper, nickel and

rare-earth metals key to battery, smartphone and catalytic

converter technology.

Sweden's association of local authorities, SKR, says local

governments will need to invest about 100 billion crowns in

infrastructure like roads, railways and ports in the next decade

for the planned projects, further straining their finances.

"The risks that local authorities are taking on are huge,"

said SKR chief economist Annika Wallenskog, adding if projects

stall or fail, taxpayers could end up with the bill.

On Dec. 4, SKR presented a five-point programme to Finance

Minister Elisabeth Svantesson demanding more financial help for

communities straining to accommodate new industries.

"We didn't get any response," Wallenskog said.

Svantesson, however, pointed to increased infrastructure

spending, financial support for new homes in northern Sweden and

government subsidies for new, climate-friendly technologies.

"I understand it is difficult, especially for Skelleftea where

they have very big challenges," she told Reuters after

presenting new economic forecasts including a downgrade to

growth next year. "But the government is doing a lot to create

the right conditions in Sweden and around the regions. So I'd

say the risks and the costs are shared already."

Officials in Lulea, where steel firm SSAB is

building a 52-billion crown 'green' steel mill and Australia's

Talga ( TLGRF ) plans to invest 3 billion crowns in a battery anode plant,

are not convinced.

Lulea will need to invest over 30 billion crowns in public

infrastructure in the next decade to support the industries.

"Our challenge is that many of these costs are coming now

and ... the returns for us won't come for another 20 years,"

councillor Carina Sammeli, said.

Lulea debt has doubled in the last couple of years to around

4 billion crowns and will increase further to finance a 10-15

billion crown expansion of Lulea port, Sammeli said, adding that

the town of 80,000 people cannot handle the financial risk.

GREEN GOLD OR GREEN BUBBLE?

The challenges facing Northvolt, including growth in EV demand

that is moving at a slower pace than hoped, are not isolated.

Swedish miner LKAB has postponed plans to produce CO2-free

sponge iron at its Kiruna mine by at least a decade and warned

that its future growth could be affected by problems with the

rail link between mines and ports in Sweden's Lulea and Narvik

in Norway.

Denmark's Orsted has dropped plans to produce bio-fuel in

Ornskoldsvik on Sweden's east coast, citing slow demand.

The developments highlight some of the hurdles to the

country's ambition to remain a leader in the green industry

transition.

While Sweden's electricity is 98% fossil-free and around

half the price of the rest of Europe, according to Eurostat,

heavy industry association SKGS estimates businesses will need

99 terawatt hours from renewable sources by 2030 - more than

twice current needs - to enable a switch from fossil fuels.

New nuclear power stations are too slow to build and costly,

while wind power - the quickest and cheapest option - faces

opposition from local voters.

Some, like Henrik Henriksson, CEO of steel maker Stegra,

which is building Sweden's largest steel factory powered by

green hydrogen in Boden near Lulea, remain optimistic, seeing no

easing in demand from customers.

"We sold 50% of our production already on a seven-year

contract," Henriksson told Reuters in one of hundreds of

portacabins overlooking the vast construction site.

Production is expected to start in 2026 and reach annual

output of 5 million metric tons by 2030.

The nearby municipality of Boden - which SKR estimates needs

to invest about 5 billion crowns in infrastructure over the

coming years - is striving to keep up with Stegra's timetable.

It expects a budget deficit of around 500 million crowns over

the next three years.

"We are taking a risk, absolutely we are," mayor Claes

Nordmark said. "But if we don't take it, people will just go

somewhere else."

($1 = 10.9015 Swedish crowns)