[SMM Analysis]Galp Announces Withdrawal from Setúbal Lithium Refinery

Recently, according to The Portugal News, Portuguese energy company Galp submitted a statement to the Securities Market Commission (CMVM) stating that after Northvolt's withdrawal and the failure to find other partners, Galp has decided to abandon the Aurora project to build a lithium refinery in Setúbal.

The group stated that Galp has decided not to proceed with the construction of the Aurora project. Back in November 2021, Galp partnered with Swedish renowned EV battery manufacturer Northvolt to form a joint venture, with each holding a 50% stake, aiming to build a large-scale lithium processing plant in the coastal city of Setúbal, Portugal. The project's total investment was expected to exceed 1 billion euros (approximately $1.05 billion), and according to the initial plan, the refinery was expected to commence commercial operations in early 2026.

However, Northvolt informed Galp of its decision to cease investment in the Aurora project in early 2024.

Since then, Galp has been seeking new international partners but has not succeeded. Since 2021, Aurora has been dedicated to establishing a lithium conversion plant in Setúbal, aiming to utilize Portugal's lithium reserves to supply the battery industry.

According to Galp, despite significant efforts, including forming a qualified team, conducting engineering studies, preparing licensing procedures, and seeking incentives and financing, the current environment and the inability to rely on international partners have made the project unfeasible.

On October 28, Galp's CEO stated that the company would not rush to make a final investment decision on building a lithium refinery in Portugal until the project guarantees "sufficient returns."

"We are in the final stages of engineering details and discussing incentives. A lot of work has been done and is still ongoing. However, I must say that the current market is very challenging, and we are not in a hurry to make a final investment decision until we see sufficient returns from the project. We believe that time has not yet come," the CEO said.

It is worth mentioning that Northvolt, once highly anticipated in the European EV battery sector, also fell into severe financial crisis on November 22. After the breakdown of financing negotiations with investors and creditors such as Volkswagen and Goldman Sachs, Northvolt had no choice but to file for Chapter 11 bankruptcy protection in the US, which undoubtedly brought a significant impact and shock to the entire European EV battery industry.