Four Danish pension funds announced they are investing €300m in Sweden’s H2 Green Steel, which is raising money to build the world’s first large-scale green steel plant, via a mezzanine loan provided by their collectively-owned alternatives asset manager AIP Management.

The investment is part of a €4.2bn equity/debt fundraising by H2 Green Steel announced yesterday, which builds on a €1.2bn funding round completed in September.

The four pension funds are PKA, PenSam, Lærernes Pension and Akademiker Pension.

Torsten Fels, chief executive officer of PenSam, said: “With this project, we can make steel with up to 95% less CO2 than traditional production. It is a huge saving with really positive perspectives for the entire industry, but also for all the purchasers of steel and for PenSam’s members.”

Anders Schelde, AkademikerPension’s chief investment officer, said now was the time to start decarbonising one of the most CO2-heavy industries – the steel industry.

“Economically, it makes sense – partly because green steel can be sold more expensively than black steel,” he said, describing the investment as a good example of how return and responsibility could easily go hand in hand.

Copenhagen-based AIP Management is owned by PKA, PenSam, Norway’s Storebrand and the AIP Partners, also manages investments for AkademikerPension, Lærernes Pension and a group of Swiss pension funds.

AIP Management said it was “pleased to announce that in its role as lead second line lender it has provided €300m of mezzanine financing to H2 Green Steel to finance the construction of the world’s first large-scale green steel plant and Europe’s first giga-scale electrolyser at H2 Green Steel’s site in Boden, northern Sweden”.

Giving the overall picture of its latest funding round, H2 Green Steel said it had definitive debt financing agreements for €4.2bn in project financing and increased the previously announced equity raised by €300m.

“Total equity funding to date amounts to €2.1bn,” the company said, adding that it had also been awarded a €250m grant from the EU Innovation Fund.

The firm said it had now secured funding of nearly €6.5bn for the plant.

Explaining how the H2 Green Steel’s planned integrated plant could produce steel with such relatively low CO2 emissions, AIP Management said coal in the iron ore reduction process was to be replaced with green hydrogen, which would be produced on-site, and the steel making and downstream finishing steps would be electrified, using electricity from renewable sources.

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