Stockholm (NordSIP) – Swedish steel company H2 Green Steel (H2GS) powers on with its ambitious project to produce fossil-free steel, despite a new wave of criticism questioning the profitability of the venture. On 22 January, the company proudly announced that it had secured definitive debt financing agreements for EUR 4.2 billion and increased the previously announced equity raised by EUR 300 million. The company has also been awarded a EUR 250 million grant from the EU Innovation Fund. Altogether, this amounts to nearly EUR 6.5 billion of financing for the world’s first large-scale green steel plant in Northern Sweden.
“No one has scrutinized our project more thoroughly than those who back our financing,” comments Henrik Henriksson, CEO of H2GS. “This massive commitment from our lenders, investors and the Innovation Fund is 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 decarbonization initiatives in hard-to-abate industries,” he adds.
The lenders
The debt financing consists of EUR 3.5 billion in senior loans and a junior tranche of up to EUR 600 million. The international banks providing the senior debt will be lending in part under the cover provided by Riksgälden (Swedish National Debt Office), as a green credit guarantee and Euler Hermes as an export credit cover for EUR 1.2 billion each. The group of over 20 lenders includes Svensk Exportkredit (SEK) and the European Investment Bank together with commercial banks, led by BNP Paribas, ING, KfW IPEX-Bank, Societe Generale and UniCredit.
“We are extremely proud to have supported the venture in this precedent-setting financing,” says Christophe Hadjal, Managing Director, Regional Head for Europe Mining, Metals and Industries Finance, Societe Generale. “This transaction illustrates very well how industrial innovation can be financed to enable transition.”
The junior debt consortium is led by a Danish investment manager dedicated to investing in energy and infrastructure assets, AIP Management, and includes several European and international investment banks and funds. Notable among those is a group of Danish pension funds – AkademikerPension, PKA, PenSam, and Lærernes Pension.
“The climate frontline is constantly changing, and now is the time to start decarbonising one of the most CO2-intensive industries, the steel industry,” comments AkademikerPension’s CIO, Anders Schelde (in Danish). “Economically, it makes sense – among other things, because green steel can be sold at a higher price than black steel. Therefore, this investment is a good example of how returns and responsibility can easily go hand in hand. It requires a lot of work, which the AIP team has done in an exemplary manner,” he adds.
The private equity investors
Last September, H2GS announced it had raised EUR 1.5 billion in equity, making it the largest private placement round in 2023 in Europe. Before that, the company closed its Series A equity round of EUR 86 million in May 2021 and announced the close of its Series B1 round of EUR 260 million in October 2022.
This time around, H2GS managed to raise close to EUR 300 million more in equity, bringing the private placement in the project to a total of EUR 2.1 billion. New shareholders include Microsoft Climate Innovation Fund, Mubea and Siemens Financial Services. Additionally, IMAS Foundation and Just Climate are some of the existing shareholders to increase their investments in the company.
“IMAS Foundation continues to support H2GS, and I’m happy to see so many strong investors coming along,” shares Henrik Lundin, CEO & CIO of IMAS. “In my opinion, the key to ‘solving’ the climate crisis, is helping the hard-to-abate industries decarbonise. H2GS serves the purpose of being the first mover, but also of putting pressure on the incumbents to transform. By all means, this investment is not yet a done deal, but it is a great achievement to raise more than 5 billion euros (including debt finance last year) in this challenging market.”
H2GS has also signed a EUR 250 million grant agreement under the Innovation Fund through the European Climate, Infrastructure and Environment Executive Agency (CINEA). The Innovation Fund is financed by the European Union’s Emissions Trading System and supports innovative projects that aim to speed up the decarbonisation of European industry and accelerate the green transition.
