The EU-backed funding is part of €4.2bn in debt financing announced by H2 Green Steel for its large-scale green steel plant in Sweden, on top of equity investments of €300m and a €250m grant from the EU’s Innovation Fund.
The European Investment Bank (EIB) and the Nordic Investment Bank (NIB), have committed €371m as part of a project finance deal for the construction and development of H2 Green Steel‘s green hydrogen-powered steel plant in Sweden.
The investment is being backed by guarantees from the European Commission under the InvestEU programme, the EU’s funding programme for sustainable investment, innovation and job creation. The EIB will contribute €314m, of which €200m will be backed by InvestEU and €114m provided by commercial banks through intermediated financing. The NIB will provide €57m, of which €9m will be supported by InvestEU.
The funds committed by EIB and NIB are part of a total of €4.2bn in debt financing announced by H2 Green Steel last week, which includes more than 20 lenders such as Svensk Exportkredit, AIP Management and a range of European and international investment banks and funds. The company has also raised close to €300m in equity from new shareholders such as Microsoft Climate Innovation Fund, Mubea and Siemens Financial Services as well as existing shareholders such as IMAS Foundation and Just Climate. The company said the latest equity investments bring private placements in the project to a total of €2.1bn.
Impact Investor asked Shaun Kingsbury, co-chief investment officer for Just Climate, the climate-led investment business set up by Generation Investment Management, about the company’s decision to reinvest in H2 Green Steel.
“Steel production is the second highest emitting sector in industry, after cement. H2 Green Steel is playing a pioneering role in the decarbonisation of this industry, by developing a first-of-a-kind green steel plant,” he said. “New steel plants require significant capital investment, and we brought our belief and expertise in flexible fundraising approaches to the project to overcome this challenge.”
H2 Green Steel has also signed a €250m grant agreement under the EU’s Innovation Fund, a funding programme for the demonstration of innovative low-carbon technologies in support of the decarbonisation of European industry and the green transition.
Impact Investor previously reported on H2 Green Steel’s series A and B fundraising in 2021 and 2022, in which the company secured backing from several investors, including pension funds and foundations. As recently as September last year, H2 Green Steel also raised €1.5bn in equity, which it claims was the largest private placement round in Europe in 2023.
Henrik Henriksson, CEO of H2 Green Steel, commented: “This massive commitment from lenders like the European Investment Bank [are a] true recognition of the quality of our company. It’s also a big win for the climate as we hope the model will inspire the financing of other decarbonisation initiatives in hard-to-abate industries.”
H2 Green Steel said the total funding in its steel plant to date amounted to €6.5bn. A spokesperson confirmed the plant was expected to be operational by the end of 2025/beginning of 2026.
H2 Green Steel was founded in Stockholm in 2020 with the aim of decarbonising the hard-to-abate steel industry, which is said to be responsible for around 5% of CO2 emissions in the EU and 7% globally. According to the International Energy Agency, it is currently the largest industrial consumer of coal, providing around 75% of its energy demand.
Located in Boden in northern Sweden, H2 Green Steel’s steel plant is replacing coal in the steel production process with hydrogen, which is produced through electrolysis in which the electricity is powered by renewable sources. The green steel from the plant will have a carbon footprint close to zero, with up to 95% less CO2 emissions compared to steel produced using coke-fired blast furnaces.
The company said it would focus on the production of flat steel products, which generally consist of sheets and plates, targeting mainly the automotive, construction, household appliances, industrial equipment, and energy sectors.
The backing from InvestEU is supported in part by the programme’s research, innovation and digitisation window, a policy area dedicated to supporting the EU policy objective of developing and boosting innovative technologies for the green transition. It is also said to be in line with the European Commission’s Green Deal Industrial Plan, which aims to provide support to scale up the EU’s manufacturing capacity for the net-zero technologies required to meet Europe’s climate targets.
The operation is also part of the EIB’s commitment to an additional €45bn in financing on top of its regular lending volumes, to support manufacturing in strategic net-zero technologies.