Fortescue expects hydrogen revenue to grow within three years

First taxi out of range

But a long-standing standoff with the Tasmanian government over the price and supply of power and water has stalled the Bell Bay project and Dr Hutchinson hinted that Fortescue’s first hydrogen exports could come from Queensland’s Gibson Island. , where the company is working with Incitec Pivot to modernize an old fertilizer plant.

“I think the first green hydrogen we produce will probably come out of Australia and be exported to Germany,” he said.

“Starting at Gibson Island in Queensland I would say Queensland will probably be the first taxi out of range to be honest.”

Gibson Island traditionally converts methane gas to ammonia; a chemical compound containing nitrogen and hydrogen.

A large part of the world’s hydrogen exports is likely to be initially shipped as ammonia because ammonia is an easier substance to transport than pure hydrogen.

When asked when FFI would start generating revenue from selling hydrogen or ammonia, Dr. Hutchinson noted that it would be in 2024 or 2025.

“I really hope we have some available [in the] ’24, ’25 schedule,” he said.

“The geopolitical environment will only serve to accelerate this. Energy security is leading more and more countries to green energy solutions.”

Dr Hutchinson said he had not given up on Bell Bay, while Fortescue also plans to build large renewables hubs in north-west Australia, likely to enable green hydrogen production on a massive scale.

“We are still working very closely with the Tasmanian government in Tasmania and that will not be behind us, we hope, and Western Australia will play a very, very important role in this as we move forward,” he said.

“Andrew and the team have done an amazing job creating opportunities around the world for green hydrogen supply projects.

“We have the capacity to supply 15 million tons of green hydrogen if we want to and the demand is there. On the demand side, I see a huge demand for our product and I don’t think it’s going to be a problem at all.

“I think the 2030 target of 15 million tonnes is absolutely achievable.”

Queensland is now home to the two most advanced FFI projects; Apart from Gibson Island, the company is also building a factory in Gladstone that will make the electrolysers that convert water into hydrogen and oxygen.

Dr Hutchinson said the Gladstone factory would make its first electrolyser before the end of December 2023.

‘The Saudi Arabia of the green energy world’

Exporters of Australian energy commodities, such as coal and gas, have traditionally focused on Asian customers because Australia’s geographical proximity to Asia means that local exporters can source their products there cheaper than their rivals in the Americas, Middle East or Africa.

But geography is a double-edged sword; exporters from the Americas, Africa and the Middle East can usually get their products to Europe more quickly and cheaply than Australian producers.

Asked if geography would likely mean Australian hydrogen export projects would eventually find it difficult to compete with rivals that were closer to Europe, Dr Hutchinson said Fortescue wanted to produce hydrogen in many places around the world.

“We are looking [hydrogen] projects in Europe,” he said.

“The only problem Europe has is that it has more challenges to produce green energy at scale than probably Australia.

“Given the scale of what needs to happen, this is a huge opportunity for Australia to become almost the Saudi Arabia of the green energy world, so we’re doing both.”

US President Joe Biden’s landmark Inflation Reduction Act contains subsidies for low-carbon hydrogen (approximately $3 per kilogram) and Dr. Hutchinson said the passage of the legislation this month in the US Senate would help green hydrogen be competitive with “grey” hydrogen, which is produced from methane without capturing carbon emissions.

“However, there are also opportunities to produce green hydrogen in the United States and the recent Inflation Reduction Act puts the United States in a unique position,” he said.

While a purpose-built vessel this year sent the world’s first cargo of liquid hydrogen from Victoria to Japan, Dr Hutchinson said Fortescue’s first hydrogen exports would likely see the product transported inside compounds that were easier to transport in conventional ships.

“When you ship, you have to convert it to green ammonia or green methane and we’re working with our customers to really understand what they want,” he said.

war treasure

FFI theoretically receives 10 percent of the profits made by Fortescue’s flagship iron ore business, and that allocation accumulates over time if the amounts are not spent immediately.

FFI’s cumulative war chest currently stands at $1.1 billion and the division expects to spend up to $700 million in the coming year.

Fortescue has vowed to avoid burdening its own balance sheet with the task of fully financing FFI’s myriad projects and when asked how investors should value the split given the embryonic nature of the hydrogen market, Dr. Forrest said those who wanted to sponsor an FFI initial public offering had suggested to him, he might go public for close to $20 billion.

“It was a request from a very large group to ask me to consider listing FFI separately,” he said Monday, without revealing the identity of the group.

Fortescue shareholders will receive a final dividend of $1.21 per share based on Monday’s earnings results, bringing the full-year dividend to $2.07 per share.

Both the dividend and earnings were better than analysts expected, with Dr. Forrest receiving dividends worth $2.34 billion for the year in recognition of his ownership stake in Fortescue now standing at nearly 37 percent. .

Moody’s Investor Services analyst David Xu said he was comfortable with Fortescue’s ability to finance its growth plans.

“Fortescue continues to maintain a conservative balance sheet with very strong liquidity and low financial leverage, giving the company ample capacity to fund its upcoming dividend payments, as well as capital expenditures, which are likely to remain elevated in the future. short term,” he said.

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