Al Gore-backed Swedish green steel start-up examining overseas moves after fundraising

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Europe’s leading green steel start-up is contemplating new projects in the US, Canada, Brazil and Portugal after raising the continent’s biggest private placement this year to build its first factory in northern Sweden.

H2 Green Steel raised €1.5bn in equity on Thursday from investors including GIC and Temasek from Singapore, Al Gore’s Just Climate fund, and the Hy24 hydrogen fund backed by Airbus, Axa and Baker Hughes, among others.

The Swedish start-up will use the proceeds, as well as €3.5bn in debt financing that it raised last year, to build a plant in the Swedish town of Boden, just below the Arctic Circle. The plant will produce hydrogen from renewable energy. It will then use the hydrogen to produce green steel for customers ranging from Mercedes-Benz and Cargill to Scania and car parts maker ZF.

Henrik Henriksson, chief executive, told the Financial Times that although H2GS was “95 per cent” focused on the plant in Boden it was also considering opportunities in four more countries alongside miners Vale and Anglo American and utility Iberdrola. The projects under consideration were primarily to produce green hydrogen and fossil fuel-free sponge iron — purified iron ore that can be readily turned into other products.

“We are looking seriously at all four of them,” Henriksson said of the projects.

“When we go outside Sweden, we would like to have somebody who would have a solid base in that country,” he said. “We bring first-mover advantage, they the local knowledge.”

H2GS is aiming to start production of its steel, which will have up to 95 per cent fewer emissions than the traditional alloy, at the end of 2025 and reach full production of 5mn tonnes the following year. Both dates represent delays of a year or more compared with the original plans announced in 2021, because of the after-effects of the coronavirus pandemic.

Europe produces about 150mn tonnes of steel a year, but most manufacturers are looking at ways of making it with far fewer carbon emissions than existing methods.

H2GS’s method requires significant amounts of electricity — at full production of 5mn tonnes, it estimates it will need 13-15 terawatt hours annually, close to a tenth of Sweden’s total capacity.

But northern Sweden has large amounts of surplus energy, which three separate companies are using to power an industrial renaissance. The investments have created thousands of new jobs in a region that has struggled economically for decades.

As well as H2GS, the area is host to Hybrit, a rival green steel group with Swedish state backing, and Northvolt, the battery manufacturer.

H2GS, whose shareholders include the Agnelli, Wallenberg and Maersk families as well as Spotify’s chief executive and the investor that founded Northvolt, started ground work at Boden in the summer of 2022. However, the plant received its full environmental permit only in June.

The €1.5bn fundraising confirmed a story by the FT in April that H2GS was working with bankers at Morgan Stanley to raise fresh equity.

“This allows us to push the go button, and to move full speed ahead,” Henriksson said on Thursday. He added that, thanks to its successful fundraising, H2GS offered a “recipe” for other companies on how to decarbonise sectors such as steel and cement whose emissions are among the most difficult to reduce.

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