Stegra’s Financial Crisis Threatens Europe’s Green Steel Ambitions

Europe’s Green Steel Pioneer Faces Existential Funding Crisis

Swedish green steel startup Stegra is fighting for survival as it confronts a rapidly expanding funding gap that threatens to derail Europe’s ambitious decarbonization plans. The company, formerly known as H2 Green Steel, finds itself in a precarious position just months after its sister company Northvolt collapsed despite raising $15 billion.

Europe’s Green Steel Pioneer Faces Existential Funding Crisis
Mounting Financial Pressures
Emergency Measures and Restructuring
Investor Concerns and Government Response
Broader Implications for Europe’s Green Transition

According to internal discussions revealed to the Financial Times, Stegra executives have explicitly warned their board that “we must avoid parallels with Northvolt” – yet the similarities are becoming increasingly difficult to ignore. Both companies emerged from the same Swedish financial ecosystem with grand ambitions to transform European industry.

Mounting Financial Pressures

Stegra’s financial situation has deteriorated dramatically in recent months. During an emergency board meeting this month, executives revealed that the funding gap for its flagship plant near the Arctic Circle has ballooned from approximately €500 million in July to between €1.2 billion and €1.5 billion today. The company now faces what insiders describe as a “crunch meeting” with nervous lenders.

The severity of the situation prompted legal counsel from Mannheimer Swartling to recommend weekly board meetings to closely monitor the company‘s liquidity. Lawyers specifically advised the board to convene well before the 12th of each month to decide on social security payments and before the 25th to determine wage disbursements – clear indicators of the cash flow pressures the company faces.

Emergency Measures and Restructuring

Behind the scenes, Stegra is implementing multiple survival strategies. The company has delayed a galvanization line, reducing immediate funding needs by €140 million but potentially affecting deliveries to major customers including Volvo, Porsche, and Scania. While company representatives downplay the impact on customers, the move signals the depth of the financial strain.

More significantly, Stegra is exploring outsourcing critical components of its Boden facility, including hydrogen and electricity plant assets. These sale-and-leaseback arrangements could potentially save €1.3 billion in capital expenditure but wouldn’t be finalized until April or May 2025 – a timeline that may be too slow given the company‘s current burn rate of €280 million monthly., as as previously reported

Investor Concerns and Government Response

The company‘s financial predicament has exposed tensions among its backers. Citibank has reportedly placed its €29 million loan into a workout group, with other banks following suit by placing Stegra under “special measures.” One financier familiar with the situation noted that “it is hard to see anything else than equity investors getting all but wiped out.”

Stegra has initiated a new financing round targeting nearly €1 billion and points to “strong initial equity commitments” from founders and lead investors including Altor, Just Climate, and the Wallenberg family foundation. However, the company’s recent appointment of restructuring specialists PJT – the same firm engaged by Northvolt before its collapse – suggests deeper concerns.

Adding to the challenges, the Swedish government appears reluctant to intervene, mirroring its stance during Northvolt’s final days. Stegra executives partially blame their predicament on Sweden’s failure to disburse €165 million in EU-approved aid.

Broader Implications for Europe’s Green Transition

Stegra’s struggles represent more than just another corporate crisis – they highlight systemic challenges facing Europe’s green industrial ambitions. As one insider noted, “Everybody is very quick to say it is Northvolt mark two. But if you have something of value, you can raise money off it. That is a fundamental difference to Northvolt.”

Yet the parallel remains troubling for policymakers and investors banking on Europe’s ability to compete in the global green technology race. The company’s fate will likely influence how both public and private sectors approach funding large-scale green industrial projects in the future.

Stegra maintains public confidence, stating that it is “confident that our ongoing financing round, including opportunities for outsourcing and selected strategic partnerships, will be secured in an orderly fashion.” But with liquidity reportedly lasting only 1.7 months at current burn rates, the company faces a race against time to secure its future and prove that Europe’s green steel ambitions can withstand financial headwinds.