H2 Green Steel has secured €4.2bn in financing to complete a giant steel manufacturing plant in northern Sweden.

The debt is secured by a guarantee from Euler Hermes, Germany’s export credit agency, because H2 is buying technology from German companies SMS and thyssenkrupp nucera.

BNP Paribas, ING, KfW Ipex-Bank, Société Générale and UniCredit are the “core banks” in the deal, according to a list provided by H2.

The other banks participating in the financing are BBVA, Bayern LB, Commerzbank, Crédit Agricole, Deutsche Bank, DNB, Intesa Sanpaolo, Kommunalkredit, the Nordic Investment Bank, Santander, SEB, SEK and SMBC.

KfW Ipex-Bank acts as the Euler Hermes advisor, covered facility agent and ECA agent.

Instead of coking coal, the steel-making process at the plant near Boden will be powered by hydrogen produced from renewable energy, releasing only 5% of the emissions of steel made with coal-fired power.

The heavily polluting steel-making sector has been difficult to decarbonise, making the Boden plant one of the first attempts in Europe at large-scale green steel production. Steel accounts for around 25% of the EU’s annual carbon dioxide emissions, according to KfW Ipex-Bank.

H2 also closed a further €300mn in equity investment and won a €250mn grant from the EU Innovation Fund, which is financed by the EU’s emissions trading system. The company has clinched purchase agreements from automotive companies and aims to make its first deliveries next year.

“No one has scrutinised our project more thoroughly than those who back our financing,” says H2 CEO Henrik Henriksson. “This massive commitment from our lenders, investors and the Innovation Fund is true recognition of the quality of our company. It’s also a big win for the climate as we hope the model will inspire the financing of other decarbonisation initiatives in hard-to-abate industries.”

Ulrich Schulte Lünzum, Euler Hermes’ head of project finance, says: “As German ECA we have a strong focus on supporting the German industry in the energy transition and this project shows that German companies such as SMS and [thyssenkrup] Nucera can provide the leading-edge technology that is key to drive the transition to decarbonization of relevant industries like the steel sector.”