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Britishvolt in rescue talks to save gigafactory project

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Britishvolt is in talks with a consortium of investors over a deal which could potentially rescue the battery start-up’s ambitious gigafactory venture.

The discussions are over the sale of a majority stake in the company and securing legally-binding terms that would provide it with the “long-term sustainability” and funding to build a viable battery cell research and development and manufacturing business in the UK.

The identity of the prospective investors have not yet been disclosed by Britishvolt, which came close to appointing administrators from EY towards the end of last year. Britishvolt has ambitious plans to create a gigafactory on the Northumberland coast near Blyth to produce hundreds of thousands of battery packs annually and to create 3,000 jobs, which would make it one of the biggest employers in northeast England.

However, the company has been held back by difficulties raising funds to get the project off the ground.

Grant Shapps, the business secretary, last year refused to allow it to draw on £30 million of bridging finance from £100 million under the taxpayer-backed Automotive Transformation Fund, because key milestones were yet to be met, such as raising sufficient private investment. The company instead managed to secure a lifeline from Glencore, the FTSE 100 commodities group, one of its main backers, of about £3 million, and Lazard, the investment bank, has been advising on its options.

Glencore is understood not to be among the potential investors forming the consortium.

“The two parties will provide further details at the appropriate time and have nothing further to add at this stage,” Britishvolt said.

The filing of the company’s 2021 accounts are overdue and were supposed to be filed by the end of last month, according to Companies House.

Britishvolt was founded in 2019 by Orral Nadjari, its biggest shareholder with 25 per cent, who quit as chief executive in August. The company employs about 300 people and has been billed as an important part of the automotive sector’s transition to electric cars, the government’s levelling-up agenda and the wider transition to net zero.

Ian Levy, the Conservative MP for Blyth Valley, who has been a supporter of the project, said it was “crucial to the future of the UK automotive sector”.

“The site on the Blyth estuary remains the best site in the UK for an electric vehicle battery giga-plant with a deep water port, excellent power connections, access to a strong workforce and good transport links.”

Britishvolt reached a confidential settlement in June with Evans Randall after the financial adviser launched a £10 million-plus High Court claim for unpaid fees.

Court documents revealed the long-running financial struggles at Britishvolt, as well as the breakdown in relations with Evans Randall. They showed how Brookfield, the Canadian asset manager, had made an indicative funding offer, and Macquarie, the Australian infrastructure investor, offered its own expression of interest in the company in 2021.

Britishvolt counterclaimed in May, alleging that Evans Randall had no expertise in raising funds for the construction of “such an enormous facility for a company like Britishvolt with no physical assets, no existing business and no current cashflow save for funds generated in return for equity investment”.

Jeremy Whiteson, Partner in Fladgate’s Restructuring and Insolvency practice, commented: “The reported sale of a majority stake in Britishvolt is consistent with situations faced by many early stage British technology businesses.

Many of these businesses need significant additional funding before they can reach profitability, or in some cases, to start revenue generation. They had relied on regular rounds of funding from minority equity investors, supported, in the case of Britishvolt, by government support.

Difficulties in the market mean that the availability of funding, along with the company valuations which supported repeated rounds of funding in the past,  have now both shrunk. That reduces the fundraising options open to businesses.

Others will go through restructurings which reduce the burden of existing debts -perhaps by converting debts to equity or rescheduling repayments though agreement or a restructuring tool (such as company voluntary arrangement or restructuring plans). Far more are reaching for pre-pack administrations by which valuable IP and other key assets can be extracted to a new corporate vehicle through which new funding can be raised.

Many professionals working in this area are expecting a big increase in reported numbers of formal restructurings and increase in M&A activity with early stage tech businesses. It is hoped that the use of available tools and techniques can be used to save viable businesses, allow future growth, and salvage some value for stakeholders.”