H2 Green Steel, a Swedish company aiming to establish the world's first large-scale green steel plant, has achieved a significant milestone by securing a €4.75 billion ($5.17 billion) investment, primarily in the form of debt. This follows a recent €1.5 billion ($1.6 billion) equity round. Steel production is a major contributor to global carbon emissions, with 7 to 9 percent attributed to the sector. Traditional steelmaking relies on carbon-intensive coal-fired blast furnaces, posing challenges for decarbonization.
To address this, H2 Green Steel is developing a facility in Boden, northern Sweden, with construction in progress. The plant aims to replace coal with clean hydrogen, an unproven but promising alternative. The company has secured supply contracts, power-purchase agreements, and binding customer agreements for half of the initial yearly production of 2.5 million tonnes of near-zero steel. If construction proceeds as planned, the plant will start producing green steel by late 2025 or early 2026, with a target of reaching an annual production capacity of 5 million metric tons by 2030.
The financing, totaling €6.5 billion ($7.08 billion), includes a €4 billion ($4.35 billion) debt portion from over 20 lenders, including government entities like the European Investment Bank and major banks like BNP Paribas. Additionally, H2 Green Steel raised nearly €300 million ($327 million) in new equity funding from investors such as Microsoft Climate Innovation Fund. The project's scale and complexity have been acknowledged as groundbreaking, with experts considering the financing model a template for future initiatives.
Vargas Holding, the private equity firm behind H2 Green Steel, played a crucial role in securing funding by already securing preorders from reputable customers such as BMW and Mercedes-Benz. Furthermore, the Swedish National Debt Office's "green credit guarantee" supports the debt financing, providing confidence to investors.
Aside from revolutionizing steel production, H2 Green Steel plans to ensure a clean hydrogen supply by deploying 700 megawatts of electrolyzer capacity, representing one of Europe's largest clean hydrogen commitments. While other green steel projects exist globally, H2 Green Steel's innovative approach, coupled with a robust customer base and financial support, positions it as a potential pioneer in the future of the steel industry.
By Dan McCarthy, Jeff St. John