By Adam Clark 



  Sweden's Northvolt AB said Wednesday that it has secured $1.6 billion in debt financing to back its battery-factory plans, including backing from a European Union investment fund. 


  The package brings Northvolt's total fundraising to $3 billion as it builds two lithium-ion battery 'gigafactories' in Sweden and Germany, betting on a wave of demand from electric-vehicle manufacturers and other clean-energy companies. 


  Of the total, $350 million comes in the form of a loan agreement with the European Investment Bank. The agreement is supported by the European Fund for Strategic Investments, an EU-backed fund launched in 2015 to support key sectors of the economy. 


  Set up by former Tesla executives, part of Northvolt's pitch for investment has been that Europe needs its own supply chain for the transition to electric vehicles, to avoid losing jobs in the crucial automotive sector. Earlier this month it signed a 2 billion-euro ($2.35 billion) supply contract for battery cells with BMW AG, adding a European supplier to the German car maker's existing partners in Asia. 


  "Northvolt has been among our frontrunners, set to build Europe's first home-grown Gigafactory for lithium-ion battery cells, with a minimal carbon footprint. By supporting this state-of-the-art project, we also confirm our resolve to boost Europe's resilience and strategic autonomy in key industries and technologies," said Maros Sefcovic, an EU official who oversees the European Battery Alliance. 


  Northvolt said it is targeting 25% market share in Europe by 2030, with around 150 gigawatt-hours of annual production capacity. Its first factory in Sweden is scheduled to begin production in 2021, followed by its joint factory in Germany with Volkswagen AG in 2024. 


  Volkswagen invested EUR900 million in its partnership with Northvolt last year, taking a stake of around 20% stake. 


  "The momentum for electrification is stronger than ever. Our customers need large volumes of high-quality batteries with a low CO2 footprint, and Europe must build a fully regionalized value chain to support them," said Peter Carlsson, co-founder and chief executive of Northvolt. 


  Write to Adam Clark at adam.clark@wsj.com