Danish pension funds are investing billions in the development of green steel
23 January 2024
PKA, PenSam, AkademikerPension and Lærnernes Pension invest more than DKK 2 billion in the company H2 Green Steel, which is in the process of building the world’s first large-scale green steel mill in northern Sweden.
The four Danish pension funds are joining forces to send an amount of billions in the direction of one of the Nordic countries’ most exciting, green industrial adventures, the company H2 Green Steel.
The investment is made through the joint asset manager AIP Management as a so-called mezzanine loan. It is part of a larger capital raising, in which H2 Green Steel receives a total of more than DKK 30 billion.
The future steel mill will be located in the northern Swedish town of Boden, where the conditions are optimal for producing the green steel. It will deliver steel with up to 95% less CO2 emissions than steel produced in the traditional way.
This is done by replacing coal with green hydrogen in the processes where iron ore is heated and reduced so that it can later be made into steel.
The green hydrogen is produced on site in what will be Europe’s largest electrolysis plant.
The actual steel production and finishing is also electrified with electricity from renewable energy sources such as wind energy.
‘For U.S is that here that next natural steps in our occupation with the green adjustment.’
Jon Johnsen, managing director of PKA
Agreements with Mercedes, Ikea and Electrolux
The steel mill is expected to produce up to 2.5 million tonnes of finished flat steel per year. Among other things, it will be used to build everything from cars to furniture and white goods.
And H2GS already has several preliminary agreements in place with large, well-known companies such as Mercedes Benz, Ikea and Electrolux, who all want to use the green steel in their production.
The pension funds are happy to be able to contribute to a new and more climate-friendly technology in an otherwise very CO2-emitting industry, at the same time that the investment can provide a good return for the members’ pensions.
“For us, this is the next natural step in our work with the green transition. At PKA, we have invested heavily in renewable energy such as wind and solar for over a decade. But the reality is that everything we all consume in our everyday life must, to one extent or another, be converted to greener production methods. Especially heavy and hard-to-change industries such as steel. That’s why innovative companies like H2 Green Steel are needed,” says Jon Johnsen, CEO of PKA.
“With this project, we can make steel with up to 95 percent 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. We are set up to ensure good returns for our members, and therefore we pay close attention to whether investments generate returns. It requires a lot of specialist knowledge and it would be impossible without a partner like AIP” says Torsten Fels, CEO of PenSam.
“The climate front is constantly changing, and now is 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. This investment is therefore a good example of how return and responsibility can easily go hand in hand. It requires a lot of work, which the AIP team has undertaken in an exemplary manner”, says Anders Schelde, investment director at AkademikerPension.
“H2 Green Steel is a very good example of a type of company that we at Lærernes Pension think is very interesting to invest in. Here we are talking about a company that chooses to organize production so that the CO2 emission drops significantly. The result is a more sustainable product, which we believe is in great demand both now and in the future,” says Karsten Kjeldsen, CEO of Lærernes Pension.
Source: PKA
