AIP provides mezzanine financing for the construction of green steel plant in Boden
24 January 2024
AIP provides mezzanine financing to H2 Green Steel for the construction of the world’s first large-scale green steel plant in Boden, Northern Sweden
AIP Management is pleased to announce that in its role as lead second lien lender it has provided EUR 300 million 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.
The integrated plant will deliver steel with up to 95% less CO2 emissions than steel produced in a traditional blast furnace. This is achieved by replacing coal in the iron ore reduction process with green hydrogen, which will be produced on-site with Europe’s largest electrolyser, and electrifying the steel making and downstream finishing steps, in each case using electricity from renewable sources. Decarbonising the steel industry is an important step to limiting the impacts of climate change as the sector generates ~8% of all CO2 emissions and 25% of industrial emissions in the EU.
“We are pleased to be partnering with H2 Green Steel, its investors, and other finance providers to enable this important step in decarbonising the steel industry. Use of green hydrogen as a chemical reducing agent for the elements of the process that cannot be directly electrified is one of the highest merit order use cases for green hydrogen we have identified. It has been a remarkable journey over the past two-and-a-half years since our introduction to H2 Green Steel, and we look forward to continuing to support the team as a long-term partner of H2GS Boden and beyond.” said Greg Falzon, Partner, Co-head of investments at AIP.
In conjunction with AIP’s investment, H2 Green Steel has raised from a club of investors an up to EUR 600 million mezzanine facility along with EUR 3.55 billion of senior debt.
The green steel plant is expected to produce up to 2.5 million tonnes of finished flat steel per annum and eliminate up to 3% of steel emissions in Europe.
AIP has been working with H2 Green Steel and their advisors since early 2021 and led the structuring of the mezzanine financing for the H2 Green Steel’s Boden plant and assisted in assembling the club of mezzanine lenders.
About AIP Management
AIP is an investment manager dedicated to managing investments in energy and infrastructure assets supporting the energy transition in Europe and North America. The team consists of more than 90 dedicated professionals with extensive experience within investments and energy, located in Copenhagen, London, Madrid, and New York.
To date, AIP has invested more than EUR 7 billion into energy transition assets across Europe and the US. Once fully operational, these assets are expected to have total renewable energy capacity of approximately 7 GW replacing more than 6 million tons of CO2 emissions per annum. AIP’s investors include the Danish pension funds PKA, PenSam, Akademiker Pension and Lærernes Pension, the Norwegian financial group Storebrand, and a group of Swiss institutional investors.
About H2 Green Steel
H2 Green Steel (H2GS AB) was founded in 2020 with the ambition to accelerate the decarbonization of the steel industry, using green hydrogen. Steel, which is one of the world’s largest carbon dioxide emitters, is the company’s first business vertical. 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. H2 Green Steel is headquartered in Stockholm, Sweden, with its first green steel plant under development in Boden, northern Sweden.
Source: aip
