Sweden’s H2 Green Steel AB raised €1.5 billion ($1.6 billion) of equity to help finance the world’s first large-scale green steel plant and a giga-scale electrolyzer that will supply the site with hydrogen. 

The private placement, which the firm says is the largest this year in Europe, was co-led by French hydrogen investor Hy24, together with existing investors including Altor Equity Partners AB and Just Climate, H2GS said in a statement on Thursday. Kinnevik AB, Vargas Holding AB, the Wallenberg family were among those that also bought shares, as well as Swedish pension funds. 

“This is one of the last pieces in the puzzle,” Chief Executive Officer Henrik Henriksson said in an interview. “There might be a few more investors coming in which need a little bit more time, but this is the backbone.”

The firm is among a new breed of steelmakers seeking to overhaul the way the alloy is manufactured in one of the most polluting industries in the world. The sector, which has relied largely on the same production techniques for more than a century, accounts for about 7% of global carbon emissions.

A final investment decision will be taken in the next two to three months after the final paperwork is filed with the banks who supply the debt funding, Henriksson said. Morgan Stanley & Co. International Plc was sole financial adviser in the equity funding. 

Since launch in 2021, H2 Green Steel has raised more than €1.8 billion of equity in three financing rounds. The company closed its series A round of €86 million in May 2021 and announced the close of its series B1 round of €260 million in October 2022. On the debt side, H2 Green Steel announced in 2022 the structure for its debt financing of over €3.5 billion and renewed commitment letters in July this year.

H2GS plans to start operations in late 2025 at the plant in Boden in northern Sweden. The ground works is already done and the firm will start to build vertically now, Henriksson said. 

While acknowledging that the cost of the project has gone up because of soaring inflation and the cost of construction materials, Henriksson said that 70% of the capex was locked in earlier. About three quarters of the funding will go toward the whole project, he said, but declined to provide a more exact estimate. 

The green production technology replaces coal in the production process with hydrogen, produced on-site with Europe’s largest electrolyzer, powered by electricity from renewable sources.

The project is one of several major green technology projects in northern Sweden that will require huge amounts of electricity over the coming decades. There is increasing concern over energy supplies at a time when the whole economy will get electrified. Overall, demand is expected to double by 2045 compared with today. 

H2GS this summer signed contracts to buy iron ore pellets from Rio Tinto Plc and Vale SA’s mines in Brazil and Canada after failing to secure supply from the world’s largest underground iron ore mine near its plant. 

Sweden’s state-owned miner LKAB argues that capacity limitations on railroads used to ship ore from its Kiruna mine prevents it from supplying the startup. 

Still, Henriksson is hopeful that the spat can be resolved. The firm plans to have three to four suppliers overall and there is flexibility in the contracts. 

“It’s a little bit embarrassing if we can’t find a solution on this in Sweden as well,” the CEO said.