More Pay-the-Rich Schemes in the Name of Creating a "Sustainable Quebec Economy"
In Quebec, General Motors (GM) and POSCO Chemical announced on March 6, 2022 their intention to build a plant in Bécancour to manufacture battery components for electric vehicles (EVs), thanks to a $152 million loan from the Quebec government. Of that loan, $134 million will be forgiven if 200 promised jobs are maintained for a decade. The plant would process cathode-active materials (CAM), including nickel and lithium. These components, which account for around 40 per cent of the total cost of the battery, are found in GM's Ultium platform for its EVs. At present, most battery production takes place in Asia. A few days earlier, the German company BASF announced that it had acquired land in the same Bécancour industrial park to build a plant that would produce up to 100,000 tonnes of cathode-active materials for a refinery of intermediate nickel and cobalt base metals, and recycled all battery metals, including lithium. However, the BASF project has been put on hold, as no customers have been found for its production.
Rumours about the project for a cathode plant, the main input for the lithium-ion batteries that power EVs, circulated since autumn 2022 and the project was finally announced in August 2023. The plant is to be a partnership between Ford and south Korean battery manufacturing companies EcoPro BM and SK. EcoPro BM is the world's leading manufacturer of high-nickel active cathode materials, while SK is a conglomerate specializing in energy, chemicals, telecommunications and semiconductors. They are considered world leaders in the development and manufacture of batteries for EVs. The plant will be built in the Bécancour industrial park, and the site, located north of Highway 30, will face those of GM-POSCO and Nemaska Lithium.
Ford has signed an agreement to source lithium hydroxide, an essential component of battery cathodes, which will be produced at the Nemaska Lithium plant, also to be built in Bécancour. Announcing the construction of the $1.2 billion plant, Lisa Drake, Ford's Vice President of Electric Vehicles, said: "We're building a new electric truck plant in Tennessee. This will be our fourth F-Series truck plant in the United States. Cathodes from here will be routed to battery cells and, ultimately, to this plant. It couldn't be a more strategic investment."
The federal and Quebec governments will advance more than half of the money needed to build Ford's Bécancour plant. They are providing loans of $644 million for the construction of the new $1.2 billion battery materials plant in Bécancour. The "forgivable" portion of Quebec's loan amounts to $194 million, the equivalent of a subsidy.
Barely a month after the announcement of Ford's cathode plant in Bécancour, a plant in Granby, Quebec for the manufacture of copper foil – an important component of anodes for EV batteries – was announced by Volta Energy Solutions, a south Korean company. It plans to produce its copper foil "almost entirely from recycled metal, notably from our computer hardware waste. The new plant is scheduled to come on stream in 2026, with a production capacity of 25,000 tonnes per year," explained the government. In its second phase of 63,000 tonnes per year, the equivalent needed for 2.5 million EVs, the Quebec government will lend them $150 million on a project estimated at $750 million.
Construction of Northvolt's Mega Plant
On September 28, 2023, Swedish firm Northvolt announced the construction of a battery assembly plant 35 kilometres southeast of Montreal. The plant site covers some 170 hectares – the equivalent of 1,000 professional hockey rinks – and straddles the municipalities of Saint-Basile-le-Grand and McMasterville, in the Montérégie region. It will be Northvolt's first plant outside Europe.
The Swedish company, founded in 2015, will be able to count on an investment of $1.34 billion from the federal government and $1.37 billion from the Quebec government. The construction and production of the plant will be 80 per cent financed by the governments of Quebec and Canada.
The remainder of the project's financing will be provided by BlackRock, the Canada Pension Plan and the Ontario Municipal Employees Retirement System. Goldman Sachs was the lead investor along with Volkswagen and Swedish pension plans when Northvolt was set up in 2015 by two former Tesla executives. With the latest investment in the form of convertible notes, Northvolt has sought over $9 billion in debt and equity since 2017, the report adds. On top of this, la Caisse de dépôt et placement du Québec (CDPQ), the Quebec government agency that manages the Quebec Pension Plan, issued a press release on November 16, in which they announced an investment of "U.S.$150 million in Northvolt AB [...] in the form of convertible debt in the parent company located in Sweden."
Added to this start-up package are "production incentives," to be made available to Northvolt once it is up and running. These incentives represent another $4.6 billion -- a third of it to be paid by the Quebec government. In total, the bill for the Quebec government could rise to $2.9 billion in public funds over the next few years, of which $900 million will be offered in the form of a repayable loan and an equity stake in Northvolt. Northvolt will in addition receive and $4.4 billion from the Canadian government. For a $7 billion project, the governments will eventually subsidize up to $5.6 billion, or 80 per cent of the initial project cost.
This prompted a reaction from National Bank CEO Laurent Ferreira, who is "not a big fan of subsidies to attract foreign companies to the country." In a speech to the Chamber of Commerce of Metropolitan Montreal on September 21, a week prior to the Northvolt announcement, he told 1,300 members of the business community: "My point is that when we give subsidies to foreign companies, they go directly into the pockets of foreign shareholders who are mainly non-Canadian. I have my doubts about this model, in the longer term, in terms of wealth creation." He added, "In the long term, I don't think it's a good idea to tax Canadian companies more and give subsidies to Stellantis and Volkswagen."
Both levels of government justify the additional assistance as an amount equivalent to the Advanced Manufacturing Credit provided for in the U.S. Inflation Reduction Act, to which Northvolt would have been entitled had it chosen to build its plant south of the border. Northvolt's co-founder admitted in an interview that his company was considering locating in New York State, where it could also have benefitted from the "clean electricity" that Quebec already exports to the state. Premier Legault compared Northvolt's multi-billion-dollar investment to the investment required to build the James Bay hydroelectric complex under Premier Robert Bourassa.
The day after Northvolt's announcement, a Quebecker wrote an open letter to François Legault in the newspaper Le Devoir, pointing out that the Premier's comparison doesn't hold water, because we're talking about investing billions of dollars in a private company, not in a state-owned corporation like Hydro-Québec, which defines itself as "responsible for the production, transmission and distribution of electricity in Quebec." The author of the letter reminds the Premier that "your comparison would have made more sense if you had quoted the $110 million interest-free loan granted in 1987 by the same Bourassa government to General Motors (GM) in Sainte-Thérèse/Boisbriand. In 2002, 15 years later, operations ceased, and it wasn't until April 2017 that the full amount of the loan was repaid interest-free [...]" He concludes his letter with these words: "The amount granted to Northvolt is so outrageous – and the conditions are unknown – that one wonders where you found it [...] However, we know who will foot the bill."[1]
Environmental Impact Studies Circumvented
The fact that the Quebec government is a major partner in the plant's construction through payment, along with the federal government, of up to 80 per cent of the construction costs has led many to argue that it is in a conflict of interest since it has a vested interest in seeing the project completed as quickly as possible. Hence, the regulatory changes made by the Quebec Ministry of the Environment and the Fight Against Climate Change (MELCC) last spring to circumvent the need for public hearings on the environmental impact during the first phase of battery cell production at the plant. Already the Legault government authorized the Ministry of Economy and Innovation on November 1, 2023 to pay $22.6 million to the municipality of St-Basile-le-Grand for the building of a "temporary road" that will provide Northvolt access to the project's construction site.[2]
This is all taking place before the MELCC has completed its preliminary analysis to determine whether or not the project must undergo an environmental assessment study, like all major industrial projects. Environmentalists and experts have warned that the building of part Northvolt's plant will result in the destruction of wetlands that are home to birds and small mammals designated as vulnerable species. In March 2023, the MELCC blocked the previous owner of the land from building 2,400 housing units there because it would have been "detrimental to the conservation of biodiversity." The owner of the land had proposed to destroy 6.5 hectares of wetlands while Northvolt will destroy 13 of the 21.6 hectares of wetlands on the 170-hectare Northvolt plant site.
Stéphanie Pellerin, Associate Professor in the Department of Biological Sciences at the Université de Montréal and a wetlands specialist, consulted the MELCC's analysis of the site. She commented: "What shocks me the most about this issue is that we're giving credence to those who say, 'We're going to create green industries, so we should accept destroying ecologically important natural environments.'"
This article was published in
Volume 54
Number 2 - March 2024
Article Link:
https://cpcml.ca/Tmlm2024/Articles/M540025.HTM
Website: www.cpcml.ca Email: editor@cpcml.ca