Boden, Sweden – Swedish green steel startup Stegra AB, formerly known as H2 Green Steel, is facing a deepening financial crisis that threatens the viability of one of Europe’s most ambitious decarbonization projects. The company, aiming to produce steel using hydrogen powered by renewable energy, is grappling with cost overruns, delayed government funding, and now, a rapid exodus of key personnel, according to reports and analysis.
The situation escalated this week with reports of unpaid invoices totaling hundreds of millions of Swedish kronor and the resignation of Otto Gernandt as Chief Financial Officer. Ossi Pesämaa, an Associate Professor of Accounting and Management at Luleå Technical University, described the departures as “quite critical,” signaling a loss of confidence in the project’s future, as reported by TV4 Nyheterna.
Construction of the steel mill in Boden is approximately 60% complete, with around 70 billion Swedish kronor already invested. This figure is remarkably close to the entire market capitalization of SSAB, a major Swedish steelmaker, highlighting the scale of Stegra’s undertaking and the financial risk involved. Pesämaa noted that Stegra’s debt is now almost equivalent to that of one of Sweden’s largest industrial companies, compounded by the fact that the plant is not yet operational and faces inherent uncertainties even after completion.
Stegra had applied for an additional 10 billion kronor in funding, but Pesämaa believes this will likely be insufficient. Securing further investment is proving difficult as investor confidence wanes. The situation bears striking similarities to the recent collapse of Northvolt, a Swedish battery manufacturer, raising concerns about a pattern of overambitious green industrial projects faltering in the face of financial realities.
“I think it is very likely that this will collapse,” Pesämaa stated.
The crisis at Stegra comes as the company struggles to navigate a complex funding landscape. Initial plans to raise 10 billion kronor have fallen apart, forcing the company to seek temporary funding to buy time for a long-term solution, according to reporting from Norran. This week is being described as “decisive” for the company’s survival.
The challenges facing Stegra extend beyond simple cost overruns. The company’s financial model is heavily reliant on state aid, which was recently denied by the Swedish Environmental Protection Agency, as reported by Mainsights.io. This rejection has rapidly depleted the company’s cash reserves.
The broader implications of Stegra’s potential failure are significant. The project was considered a flagship initiative of the European Green Deal, symbolizing the industrial transition towards a low-carbon economy. According to a report by OREACO, the crisis highlights the vulnerabilities of pioneering heavy industrial projects and the gap between climate ambition and on-the-ground execution. The report notes that the confluence of inflationary pressures on construction materials and bureaucratic delays in public funding has created a “perfect storm” for first-movers in green steel.
The Financial Times reported that construction costs are running at three billion kronor per month, exacerbating the funding shortfall. Creditors have already hired Houlihan Lokey for advice, signaling a potential financial restructuring. The company’s original funding architecture relied heavily on government grants, and delays in securing these funds have prevented Stegra from accessing existing credit lines from a major banking syndicate.
Stegra’s predicament serves as a cautionary tale for other green steel projects across Europe. While the ambition to decarbonize the steel industry – responsible for approximately 7% of global emissions – is laudable, the financial and logistical challenges are proving to be far greater than initially anticipated. The company’s struggles underscore the need for realistic cost assessments, streamlined regulatory processes, and sustained government support to ensure the success of these critical projects.
The coming weeks will be critical for Stegra as it attempts to secure the necessary funding to continue operations. The outcome will not only determine the fate of this ambitious project but also send a powerful signal about the future of green steel in Europe.
