In times gone by, a connection to Northvolt was a ticket to press and investor attention for Europe’s climate tech companies. That changed when the Swedish gigafactory, the continent’s best funded startup, collapsed into bankruptcy at the end of last year.
Swedish green steel producer Stegra — previously known as H2 Green Steel — was one of those which enjoyed a connection to Northvolt. It was founded in 2020 by Vargas, the investment vehicle which also seeded Northvolt with its first cheque.
“The banks see us as two completely different projects in two completely different industries,” Stegra CEO Henrik Henriksson tells Sifted. “But, of course, we have received questions about it.”
Northvolt’s collapse leaves Stegra as Europe’s largest and best funded climate tech company, with €6.5bn of debt and equity in its coffers. It also leaves Stegra to answer many of the questions now overhanging the industry: can startups really build infrastructure? Can Europe nurture a new cohort of green industry?
“We are fully funded”
When Northvolt filed for insolvency, it had $300m in assets and $5.8bn in debts. Henriksson is keen to emphasise that, in comparison, Stegra’s finances are shored up.
“We are fully funded and financed for all the investments we need to do,” he says, adding that Stegra can continue without incoming cash for “a long time”. Stegra’s investors include Société Générale, BNP Paribas, the European Investment Bank, ING Group, KfW and Just Climate.
Stegra is currently building its first factory, in Boden, northern Sweden. It will produce steel using hydrogen rather than coking coal, which is traditionally used to produce the metal. Steel production using coal accounts for around 8% of global greenhouse gas emissions, according to McKinsey.
When it started the project, Stegra was aiming to start production in 2026, and Henriksson says that the company is still on track to do so. It’s done two years of ground work on the site and will begin installing equipment this year, which will take a year and half to complete. It’ll then need two years to ramp up to full capacity.
Like Northvolt before it, Stegra has drawn up contracts with customers in advance of producing its products, which enabled it to use its order book as collateral when it raised debt financing from banks. It’s raised €4.3bn in debt so far.
Stegra has signed orders with 30 customers in Europe, worth 130bn SEK (€11.3bn). Customers include truck manufacturer Scania and IKEA. The contracts are all seven years long and cover 50% of the total steel output from the Boden plant.
Customers tend to pay roughly 30-35% more for Stegra’s steel compared to traditional products. It comes in at €600-2,000 per tonne, depending on the variety of steel.
Climate investors have started to speak increasingly about the need for startups to produce goods without a “green premium”. Henriksson says that, in products such as cars, other decarbonised materials can offset the cost of steel, making a fully decarbonised car only 5% more expensive than a traditional one. Customers buying electric cars are often willing to pay that price, he believes.
Getting steel to customers on time will be an eagerly watched metric of Stegra’s success. Northvolt failed to reach production targets and an early warning sign about the company’s health came when BMW cancelled a €2bn order that was delayed.
Henriksson — who was headhunted to lead Stegra from Scania in 2021 — is keen to hedge his bets, flagging that building infrastructure can bring up unexpected challenges.
“I think we will most probably also have challenges in starting up our factories,” he says. “During all my years as Scania before this, we had been building factories for 130 years; it was still difficult.”
Stegra’s expansion plans
In post-mortems of Northvolt, commentators often posit that the company spread itself too thinly, thereby exposing itself to escalating costs. By the time it filed for bankruptcy protection, Northvolt had projects live in five different countries.
“From day one, we thought let’s get the first factory up and running before we fully engage with the next project,” Henriksson says.
That said, Stegra does have an expansion roadmap in the works. It has secured land agreements for projects in Portugal, Canada and Brazil; regions where it will have access to renewable energy at a low cost.
Henriksson says the consortium of banks that has backed Stegra’s first factory has “appetite” for financing expansion. Although Stegra has secured land in the three new countries, decisions on financial investment into the new sites will happen in 2026, when the plant in Boden is up and running and generating cash.
At that point, Stegra will create special purpose vehicles (SPVs) for each new project and raise debt and equity specifically for them. As well as the banks, Henriksson says Stegra’s equity investors backed the company with a road map of expansions in mind.
Mopping up Northvolt talent
Stegra changed its name from H2 Green Steel in September last year to reflect that it not only produces steel, but also hydrogen and iron (the components needed to make steel).
Stegra plans to sell the iron to other steel companies. It’s already signed offtake agreements with several European steel makers to sell half of the 600k tonnes it will produce, which Henriksson says “is enough for a couple of steel makers in Europe to test the product”.
To produce its steel, Stegra is building what is set to be the world’s largest hydrogen production plant, producing 100k tonnes a year, which it could also sell as a standalone product for a range of use cases, from fertiliser production to processing foods.
Once the Boden site is up and running, Henriksson says the company could then look to expand the site to make use of more of the iron it produces itself, by extending its steel mill. That would require, he says, fresh investment of around €2bn.
Stegra currently employs 300 people, excluding sub-contracted construction workers, and plans to ramp that up to 1,500 by the end of next year. Convincing talent to move up to Sweden’s frozen north to fulfill them could be a challenge; but a certain bankruptcy has left Stegra with a talent pool to mop up.
“There’s a lot of great talent in Northvolt that might be looking for new opportunities,” Henriksson says. “We are trying to see what we can do.”
Read the orginal article: https://sifted.eu/articles/stegra-h2-green-steel-northvolt/
