Stockholm-based startup H2 Green Steel has secured support for the €3.5bn in debt financing it needs to build a hydrogen-powered steel plant in northern Sweden. Once finalised, it would make the company one of the best capitalised climate tech projects in Europe.

On Monday, the company said it had signed conditional senior debt agreements with commercial banks BNP Paribas, ING, UniCredit, Societe Generale and KfW IPEX-Bank, as well as the Swedish Export Credit Corporation. The agreements are worth a combined €3.3bn. 

It also has board approval from the European Investment Bank for a further €750m in senior debt funding and a letter of intent for a €500m junior debt facility from a Nordic infrastructure fund. The senior debt is covered by €2.5bn worth of credit guarantees from credit agencies and the Swedish National Debt Office. 

Combined, the commitments are worth €4.55bn, more than the €3.5bn in debt the company has said it needs. The total cost of the plant is €5bn, with the remaining funding coming from equity raises — which it hopes to complete next year, it told Sifted.   

H2 Green Steel replaces coking coal — which is used in furnaces to produce steel — with renewable energy and hydrogen. Steel production using coal accounts for around 8% of global greenhouse gas emissions, according to McKinsey.

Steelmaking is an industry in which the challenge of decarbonisation is particularly difficult. Though there are companies working on it, direct electrification of the process is difficult at present so hydrogen is deemed the easiest way to green the industry. 

H2 Green Steel’s plant will be based in Boden in northern Sweden, and will use green hydrogen from 2025 onwards. The latest debt injection means the company has a similar level of capital to Northvolt, Europe’s best-funded climate startup, which has raised $8bn from investors, a combination of debt and equity. 

Henrik Henriksson, CEO of H2 Green Steel, says the deal underlines the business case of the company, its debt carrying capacity and the willingness of banks and credit agencies to support climate initiatives.

The company also announced last week that it had raised €260m in equity, from investors including Kinnevik, Hitachi Energy and Kobe Steel.

Freya Pratty is a reporter at Sifted. She tweets from @FPratty and writes our climate tech newsletter — you can sign up here. 

This article was updated to reflect that Northvolt has raised $8bn in debt and equity.