The European Investment Bank (EIB) and the Nordic Investment Bank (NIB) will participate in the project financing for H2 Green Steel’s large-scale production facility in northern Sweden.
Founded in 2020, H2 Green Steel seeks to accelerate the decarbonization of the steel industry, using green hydrogen. The founder and largest shareholder of H2 Green Steel is Vargas, which is also co-founder and one of the larger shareholders in Swedish battery maker Northvolt.
The EIB will contribute €314 million (US$342.6 million), of which €200 million is backed by a guarantee from the European Commission under the InvestEU programme, and €114 million of intermediated financing to be provided through commercial banks.
The NIB will provide €57 million to the project finance package, of which €9 million is supported under InvestEU.
The flagship project is important for the decarbonization of Europe’s primary steel industry, one of the most polluting sectors. The plant will manufacture sustainable high-quality flat steel products targeting mainly the automotive, construction, household appliances, industrial equipment, and energy sectors. Coal in the production process is replaced with a hydrogen generation plant based on electrolysis, using electricity from renewable sources.
Says EIB vice-president Thomas Ostros: “The steel industry is a strategic sector, being at the heart of the EU economy. Our commitment to reach net zero by 2050 requires this sector to undergo transformative changes. It is important that the EIB, as the EU climate bank, is supporting H2 Green Steel in its pioneering development for a breakthrough clean technology to produce low-carbon primary flat steel products.
“The project paves the way for the development of environmentally friendly steel – crucial for the decarbonization efforts of the so-called hard to abate sectors, of which steel is an important one.”
Traditional primary steelmaking is very energy-intensive and produces massive amounts of carbon emissions. The steel sector is currently responsible for about 8% of the world‘s final energy demand and 7% of carbon dioxide emissions. The plant’s steel products will have a carbon footprint close to zero, with up to 95% less CO2 emissions compared to steel produced the traditional way.
The financing agreements are supported in part under InvestEU’s research, innovation and digitization window, in line with the EU policy objective of developing and boosting innovative technologies for the green transition.
They are also in line with the European Commission’s Green Deal Industrial Plan, which aims to provide support to scale up the EU's manufacturing capacity for net-zero technologies required to meet Europe's ambitious climate targets.
The operation is also part of the EIB’s commitment to devote an additional €45 billion in financing, on top of its regular lending volumes, to support state-of-the-art manufacturing in strategic net-zero technologies.
The Nordic Investment Bank is an international financial institution owned by eight member countries: Denmark, Estonia, Finland, Iceland, Latvia, Lithuania, Norway and Sweden. The bank finances private and public projects in and outside the member-countries.
The InvestEU programme provides the European Union with crucial long-term funding by leveraging substantial private and public funds in support of sustainable recovery. It also helps mobilize private investments for the EU’s policy priorities, such as the European Green Deal and digital transition.