From afar, Sweden’s generally known as a spot the place the state and personal firms work in tandem to assist industrial initiatives flourish. The nation has spawned industrial giants, from automobile producers Volvo and Scania, to engineering firm ABB.
However one among its youthful companies, inexperienced metal startup Stegra, is asking that status into query, after it was denied funding by the Swedish authorities.
Stegra, which has raised €7.7bn from the likes of Microsoft and Mercedes Benz, instructed Sifted the transfer may hinder the timeline of its undertaking. The corporate described the federal government actions as ‘damaging’ Sweden’s attractiveness to worldwide traders, and creating “uncertainty and unpredictability.”
Stegra’s feedback comply with the high-profile chapter of Northvolt, Sweden’s flagship gigafactory undertaking, which had lobbied the state for emergency funding because it began to expire of money. The chapter left Stegra as Sweden’s largest local weather tech startup — and it’s now ramping up the stress on the federal government too.
Lack of help may gradual Stegra undertaking
Stegra goals to provide fossil-free metal utilizing inexperienced hydrogen as an alternative of coal. It’s constructing a metal plant in Boden, Sweden.
In September 2022, the corporate utilized for SEK 1.65bn (€152m) in help from Klimatklivet (‘the Local weather Leap’) — a authorities package deal to help inexperienced initiatives — for its manufacturing unit. The European Union had greenlit the sum, however, this week, native media Dagens Industri reported that it had been denied by the Swedish Environmental Safety Company, answerable for overseeing the grant.
The choice was made as a result of Stegra’s plant will emit round 500k tonnes of carbon dioxide per 12 months till it manages to attain fossil-free manufacturing in 2045, the company mentioned.
Karin Hallstan, Stegra’s communications supervisor, tells Sifted the corporate believes it’s according to the parameters set out by the Klimatklivet initiative, with the principle function to help initiatives that scale back emissions.
The choice will knock traders’ confidence in Sweden, Hallstan says.
“Failing to comply with by way of after receiving the inexperienced mild from the EU creates uncertainty and unpredictability for traders, which makes Sweden much less fascinating for worldwide capital,” Hallstan says.
“It damages the Swedish authorities’s express ambition to strengthen Sweden’s attractiveness for worldwide investments.”
Stegra wanted the funds to compete with Sweden’s state-owned firms and overseas actors which obtain bigger help sums, Hallstan says.
Stegra’s primary competitor in Sweden is Hybrit, a inexperienced metal initiative from metal firm SSAB, mining firm LKAB and vitality large Vattenfall. All three firms are partly or absolutely owned by the Swedish state. On the finish of 2023, Hybrit was awarded a grant of €3.1bn (€287m) from a authorities package deal to help industrial initiatives.
If no additional help is supplied, Stegra’s undertaking might be 98% privately financed, Hallstan says. “It’s potential that lack of help impacts the acceleration of the undertaking.”
Northvolt’s battle for state funds
Stegra’s not the primary local weather tech firm to petition Sweden’s authorities for funds. Swedish gigafactory Northvolt, which was began by the identical funding group as Stegra, seemed for state help within the remaining months main as much as its collapse.
A month earlier than Northvolt filed for Chapter 11 chapter, Swedish Prime Minister Ulf Kristersson mentioned the nation was dedicated to being “a superb place for brand spanking new know-how that’s wanted within the inexperienced transition,” however that it was not related for the Swedish state to step in and assist the corporate.
“We do not contain ourselves within the enterprise plans of particular person firms however we do need to be a superb place for this type of business,” he mentioned.
“The Swedish authorities had a fairly low curiosity in subsidising Northvolt,” an individual near the corporate instructed Sifted. “Sweden as a rustic is just towards it, they see it as a recreation they’ll’t win.”
Northvolt acquired €60m from the Swedish authorities, in comparison with a €902m package deal supplied to it by the German authorities, and €473m from Canada.
The EU help framework a “double-edged sword”
Christian Thomann, affiliate professor in company finance on the Royal Institute of Expertise (KTH) in Stockholm, says Sweden used to have a extra energetic industrial coverage, however now provides much less help than international locations like Germany.
Nonetheless, EU laws have made it more and more tough to present state help. For international locations to financially help native firms, they want approval from the EU — as within the case of Germany’s state support package deal of $902m to Northvolt. Non-approved state support, nonetheless, can result in massive fines, says Thomann.
“There are powerful guidelines in Europe to forestall this competitors over state support. There have been openings to vary this just lately, however has been a straightjacket with regards to actual subsidies for firms,” he says.
The regulation that helps keep truthful competitors and limits market distortion has, within the case of Northvolt and Stegra, created obstacles for companies that want help to sort out long-term challenges, innovate or compete globally, Thomann says. It’s like a “double-edged sword”.
Backing state-owned firms
The Swedish state absolutely or partly owns 44 firms, price an estimated SEK 820bn (€76bn). These firms have loved relative help from the federal government, in powerful instances.
A kind of is Scandinavian Airways, which acquired a credit score facility from the state in 2012 and capital help in 2020, to make sure its operations continued. Comparable packages have additionally been delivered to Swedish/Danish put up firm Postnord in 2018.
However Sweden appears to be much less supportive of local weather tech firms akin to Northvolt and Stegra than different international locations, says Gustav Martinsson, professor of finance at Stockholm College.
“Conceptually, firms like Stegra, that are really attempting to unravel a local weather situation, are necessary. The local weather downside with metal is important because it has a big carbon footprint, and it’s potential to provide it with out large emissions. Nonetheless, carbon pricing alone isn’t sufficient to facilitate a transition to climate-friendly metal,” Martinsson says.
“What Stegra is attempting to do is clear up one thing and create a marketplace for one thing that did not exist earlier than. To create this market, help is required to facilitate these huge investments.”
Sifted has reached out to the Swedish authorities for a remark.
