Eksfin to help battery industry with investments and export

Battery production is difficult to finance, but the industry, the financial services industry and the government are working together to bring it to Norway. – Our goal is to increase Norwegian export and economic growth, while also cutting emissions—and to do this we need to work with the whole value chain, explains Tone Lunde Bakker, CEO of Export Finance Norway (Eksfin).

Nordic battery agglomerations must focus on export

The demand for batteries is increasing rapidly. Southeast Asia is the world’s largest producer of batteries, while it is estimated that Europe will need 30 battery factories in the next few years to meet their needs.

There are a number of advantages to basing battery factories in the Nordic countries, including renewable energy and vacant plots near port infrastructure. In Norway, companies like Freyr, Morrow and Beyonder have already started up, and are in different phases of development. Anode material producer Vianode has been launched, while Hydrovolt has established itself as a battery recycler.

Norway and the Nordic countries have a limited domestic market for industrial batteries, and a relatively small capital market. Norwegian and Nordic battery production must therefore be internationally competitive and export-focused – from day one.

Who is contributing capital to battery investments?

In general, access to capital for new, green industry has improved in recent years. Many battery companies are listed on international stock exchanges, or plan to be. A number of Norwegian and international banks wish to significantly increase their exposure to green industries. “Private capital is absolutely necessary for the government to be able to contribute,” emphasises Eksfin CEO Tone Lunde Bakker:

“Private owners are the driver. This means that sufficient private equity must be secured before companies ask for bank loans and government financing. Owners, banks and Eksfin must develop these projects together,” she says.

How much capital needs to come from owners, banks and Eksfin, and under what conditions? The short answer is that equity is the starting point for any project—and Eksfin participates on the same terms as the banks.

Battery factories are challenging to finance

So far, Eksfin has contributed more than NOK 17 billion to export-oriented projects in solar power, offshore wind and other climate-friendly industries. As for batteries, Eksfin has issued an indication of financing for Freyr’s gigafactory in Mo i Rana. Furthermore, Eksfin has participated in the financing of a new production line for Corvus, in the company’s factory in Canada, as well as guarantees for purchases from their foreign subcontractors.

The industry itself, the authorities and the financial industry all agree that Norway must have large ambitions with regards to batteries. The only way we can succeed is if all parties collaborate – and all parties must contribute capital and willingness to take risk in order to realise investments.

Large-scale battery cell production is also challenging to finance: long timescales from the planning stage to a fully-built facility, large investments over a number of years, and competing technologies are all important factors that an investor, lender or guarantor must carefully consider.

It requires special expertise to stitch together financing for a large, international project with both public and private actors. There aren’t many in Norway who have this sort of experience, but Eksfin has learnt a lot from our earlier transactions in such areas as international offshore wind and solar energy, where we have financed Norwegian deliveries. We will use this experience in future project financing.

Olav Rygg, CCO in Eksfin.

How do SME suppliers help?

In contrast, the picture can be simpler when a smaller subcontractor has to adapt or scale to deliver to a battery plant or other industrial project.

“Small and medium-sized enterprises have close, strong relationships with their local banks. When businesses adapt themselves to new industries, it requires a willingness and ability to take risks on the part of both the owner and the bank. Our experience is that working capital, investment capital and various guarantees often fall into place at the bank more easily when Eksfin is involved,” explains Ivar Rekve.

He emphasises that Eksfin does not manage subsidy schemes: all customers must pay interest on loans, or a guarantee premium, to Eksfin, regardless of the size of the transaction. To make the process as simple as possible for the customer, it is the bank who handles applications to Eksfin in many cases.

While Eksfin can contribute with government loans and guarantees (loan capital), there are also government schemes for equity through the government venture fund Nysnø. If grants are needed, Enova, Innovation Norway and EU programs have funds for which companies can apply.