“We literally smoke fossil fuels:” Forrest on why FFI could already be worth $20 billion

Iron ore billionaire and green energy evangelist Andrew Forrest says “energy must change” and has insisted his plans to deliver 15m tonnes of green hydrogen a year by 2030 remain on track, despite the company is yet to fill in the details of exactly how to do that. will be done

In a briefing on the company’s full-year results, which generated a net profit of $6 billion in fiscal year 2021/22 and a dividend of $A2.3 billion for Forrest himself, the now chief executive of Fortescue Metals says its vision for a green energy future, including renewables and green steel, has not wavered.

“Fortescue can and will lead the green energy revolution,” said Forrest. “The energy must change. We have no choice. I mean, if you’re advocating anything else, then you’re ignorant economically or scientifically, or both.

He then added: “We cut, like everyone else, a few billion dollars a year in fossil fuels. We literally smoke it. It’s going to be a great day, and I think it’s a great day to improve revenue and margins, when we can make all of our own fuels.”

Forrest told analysts that informal discussions with global fund managers indicated a potential value of $20 billion ($29 billion) for its subsidiary Fortescue Future Industries, which is leading the company’s charge toward green energy.

That, of course, is a notional valuation, and Forrest says he currently has no intention of listing the subsidiary separately.

But he underscores what he says is the huge global interest in the green energy shift, and who ends up leading that transition, and how heavy industry can cut emissions and costs and not spend “billions of dollars” on fossil fuels each year. .

Forrest and his team have been touring the world signing deals with customers and suppliers, including a massive memorandum of understanding with Germany’s E.ON for five million tons of green hydrogen, and unveiled numerous plans in Australia for electrolyser manufacturing, production renewable energy and industrial agreements. .

The team employed by Fortescue Future Industries has now grown to more than 1,100 and has a budget of more than $1 billion for the current fiscal year, including much of the $110 million that will be spent on what are considered plans. of the world’s largest hydrogen electrolyzers. at Gladstone.

But the market is waiting to see which of the multitude of supply deals translates into signed deals, which of its many Australian projects are actually built, and how Fortescue overcomes the cost challenge of exporting green hydrogen to European and Asian customers.

Mark Hutchinson, FFI’s new chief executive who made his first public appearance at briefings with media and analysts, says he expects many announcements to be made in the coming months in what he hopes will be a “multi-billion dollar” market for green hydrogen. .

“We have a lot of projects to choose from,” he said, adding that he too saw strong demand and hoped to announce more deals with clients similar to E.ON’s.

Hutchinson compared the green hydrogen industry to the launch of today’s global oil giants Shell and bp in the early 1990s. “We’re at that tipping point,” said the former GE Europe chief, who took over at FFI. a few weeks ago.

“We are replacing the entire fossil fuel network globally… we have a lot of things to do. This is just the beginning”.

At Fortescue’s own operations, that process has begun on a small scale, at least compared to the estimated 400 GW of new renewables that might be needed to meet its green hydrogen plans.

A 60MW solar farm in the Pilbara has helped eliminate 78 million liters of diesel in the last year, and new solar farms and a large battery will be built, a new transmission line to its Iron ore project has not been completed. Bridge.

It is also working on innovative projects such as so-called “infinity trains,” which use gravity and rechargeable batteries to power the massive trains that deliver iron ore to Pilbara ports, is electrifying its fleet of trucks, and considering hydroelectric power from pumping as a storage option, thanks to the elevation of mine sites.

A 5.4GW wind and solar project is also being contemplated in the Pilbara, and even larger but as yet undefined projects further south in Western Australia, where Fortescue is reportedly signing deals with farmers to host large wind farms and it is also looking for port facilities.

Hutchinson says the push toward green hydrogen is being accelerated by geopolitical events such as the Russian invasion of Ukraine and the gas crisis in Europe, and the new US “inflation reduction bill” that he says he has made green hydrogen competitive with fossil fuel hydrogen.

He says FFI’s focus is on green hydrogen production projects in Australia, including in Queensland, Tasmania and Western Australia, but also warned that Australia and Europe may need to follow the US plan to offer credits. taxes on green hydrogen production or risk losing investment.

“I think countries around the world have seen what the United States is doing,” he said. “Europe really needs to realize what the US has done and they probably need it more than anyone else.

“If they don’t do something similar, then what will happen is all the funds will go to the US instead of Europe, which would be a real shame.”

The big question for many analysts and market watchers is the cost of transporting green hydrogen. If Fortescue signs massive deals to supply Europe with green hydrogen and wants to produce it in Australia, then how can it be done economically? The shipment of green hydrogen is considered the weak link in the technology.

In response to a question from RenewEconomy, Hutchinson said the options were to ship the hydrogen as green ammonia or green methane.

“We are looking at all the different ways to get it at the best possible cost for our customers in Europe. So that work is ongoing. It’s going to be very much driven by customers and what they want as well.”

However, at the latest analyst briefing, Hutchinson said some renewable supply projects could be built in Europe, closer to demand, at least in the early stages.

“We see there is going to be a huge demand for green hydrogen from all over the world, including Asia… so Australia is going to play a big part in that,” he said.

“I think the only problem in Europe is that it’s more challenging, you know, to produce green energy at scale, than Australia probably can. So initially I think maybe some of the projects will be in Europe. But given the scale of what needs to happen, this is a huge opportunity for Australia.”

Hutchinson says the new electrolyser manufacturing plant at Gladstone is progressing well (see photo above) and should be producing electrolytes by 2023, at a rate of up to 2 GW a year, which would make it the largest in the world.

It confirmed that Plug Power technology would be used initially, per the original agreement (oddly, Plug Power did not mention this project in its most recent report), but FFI will also be looking at other technology providers.

(Note: This story has been updated to reflect that the $20 billion figure cited by Forrest is $US.)