Sweden-based H2 Green Steel has raised about €1.5b ($1.6b) in equity in a landmark deal that demonstrates the strength of global investors’ appetite for large-scale hydrogen-based steelmaking.

Proceeds from the transaction, which is the largest private placement in Europe in 2023 so far, will help finance construction of the world’s first large-scale green steel plant at Boden in Sweden. The project includes Europe’s largest deployment of electrolysers, with capacity of  more than 700MW.

“This marks the start of industrial-scale decarbonisation of basic materials production. The sector will require substantial investments over the coming decades to enable our customers to produce green end products and, thereby, meet their climate targets,” said Otto Gernandt, CFO of H2 Green Steel. “We hope this financing will contribute towards accelerating the much needed, broad participation of capital markets in the transformation of hard-to-abate industries.”

“This marks the start of industrial-scale decarbonisation of basic materials production” Gernandt, H2 Green Steel

The deal was co-led by new investor Hy24—a dedicated hydrogen fund the backers of which include industrial gases manufacturer Air Liquide and France’s TotalEnergies—together with existing investors private equity firm Altor, Singaporean sovereign wealth fund GIC and Just Climate, a green investment firm backed by former US Vice-President Al Gore’s Generation Investment Management.

The transaction also includes other new investors and existing shareholders such as technology firm Hitachi Energy.

“The calibre of investors that are backing us is impressive. Some of the most professional institutions, investors and industrial companies globally are part of this round and we are proud that they all share our commitment to sustainability as their true north,” said Henrik Henriksson, CEO of H2 Green Steel. “€1.5b is the largest private placement in Europe this year, and the appetite to invest in us proves both our solid business case and the market demand for green steel.”

Since its launch in 2021, H2 Green Steel has raised more than €1.8b of equity in three financing rounds.

”H2 Green Steel Boden is the most advanced large-scale, green industrial project in the world,” said Pierre-Etienne Franc, CEO of Hy24. “It is a trailblazer in decarbonisation of hard-to-abate industrial sectors like steel.”

Groundworks at the Boden plant started in the summer of 2022. The plant is expected to start up at the end of 2025, with an initial green steel output of 2.5mt/yr, rising to 5mt/yr by 2030.

Green hydrogen for the steel plant will come from electrolysers supplied by Germany’s Thyssenkrupp Nucera. The electrolysers will be configured in 20MW modules, with a total installed capacity of over 700MW.

In demand

“Green steel products are already in exceptionally high demand from the automotive industry, which will thus be able to reduce its carbon footprint so decisively,” Thyssenkrupp Nucera said earlier in 2023 on announcing the contract with H2 Green Steel.

But high costs remain the main barrier to green steel production. On average, costs of producing greener steel—whether through CCS or hydrogen integration—can be up to 50% higher than conventional production, the Oxford Institute for Energy Studies noted in a recent research paper. “This is largely due to the high capital costs inherent in carbon capture technologies and electrolysers, despite projections for cost reductions with increased deployment,” it said.

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Author: Stuart Penson