H2 Green Steel scoops $4.5bn debt financing for hydrogen-based plant
European financial institutions including BNP Paribas and Société Générale commit vast sums to Swedish company and its green steel project
A hydrogen-based green steel plant in Sweden is one step closer to becoming a reality after developer H2 Green Steel nailed down commitments for a massive €4.55bn ($4.54bn) in debt financing from an array of European banks and export credit agencies.
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This more than covers the Swedish company’s €3.5bn debt financing requirements and will support the company in its aim of building a hydrogen-powered green steel facility in the country’s north.
This project, which is scheduled to come on line in 2025, aims to deliver five million tonnes of green steel by 2030, made with hydrogen produced from Sweden’s abundant renewable resources.
The plant will use hydrogen to make direct reduced iron (DRI) from iron ore, which can then be used to make green steel. This hydrogen-based process replaces the use of carbon-intensive fossil fuels in creating iron suitable for steel making. Currently steel production accounts for around 7% of global carbon emissions, but decarbonising the sector will require vast funds to overhaul manufacturing processes, install renewables and re-structure supply chains.
H2 Green Steel, which counts Swedish Spotify billionaire Daniel Ek among its backers, secured €3.3bn in debt from a variety of financial institutions, including Sweden’s export credit bank Svensk Exportkredit and commercial banks BNP Paribas, ING, UniCredit, Société Générale and KfW IPEX-Bank.
It also secured a €750m financing commitment from the European Investment Bank for the Swedish plant. An as-yet-unnamed infrastructure fund comprising Nordic investors has committed to a further €500m. All the agreements are subject to final due diligence.
It is not clear whether H2 Green Steel, which plans to finance the Swedish project with around a third of equity to two thirds debt, will use all €4.55bn of the debt facilities at its disposal, or just enough to cover the €3.5bn it says it needs.
“We are impressed by the collaborative approach of these institutions and the leadership they are displaying in financing the transition,” said H2 Green Steel’s chief executive officer, Henrik Henriksson. “The support from the European Investment Bank, Swedish National Debt Office and some of the world’s leading export credit agencies and banks, not only underlines our business case and debt carrying capacity, but also highlights the willingness to support initiatives that will help fulfil the target of the Paris agreement.”