Andrew Forrest has long dreamt big projects, with his latest developing a Fortescue arm producing green hydrogen energy to sell around the world.
Back in 2003 it was to create the third force in iron ore in Australia, which he has achieved and the company is now valued at $54bn and generating $1bn in dividends, and two years ago it was a grand plan to rid the world’s oceans of plastic waste by seeking agreement from primary producers to lift their price to create sustainable recycling.
That one is still being formulated but the hydrogen plan is to create a new arm of Fortescue selling green hydrogen.
As an aside Forrest’s plans are just one more bit of evidence how corporate Australia is a light years ahead of Canberra on the need to produce sustainable energy.
Woolworths’ Brad Banducci joined the list, including rival Coles, yesterday committing to power his stores by 100 per cent renewable energy by 2025 but Canberra still can’t commit to be net carbon neutral by 2050.
The details of Forrest’s plans are not yet finalised but with typical flourish he launched it at Wednesday’s annual meeting, throwing in the fact he and Fortescue deputy Julie Shuttleworth and others have been on the road for months travelling to 23 countries with 24 to go developing their energy plan.
Just what that actually means is another question because his PNG deal is for hydro power not hydrogen at this stage.
Forrest talks of green hydrogen which means the electrolysis splitting the water atoms are powered by renewables like wind and solar creating green hydrogen.
There is blue hydrogen which comes from gas, which Peter Coleman at Woodside argues creates the market to supply green hydrogen. It’s a moot point and purists say a gas hybrid version doesn’t pass muster.
On Wednesday Fortescue folk said final decisions were still to be made on the exact details.
When asked at Fortescue’s annual meeting chief executive Elizabeth Gaines was not precise on the plans.
Hydrogen is derived by splitting the water atoms so you need abundant water and renewable energy to power the process.
Then the power can be converted into ammonia and fertiliser and used in every conceivable process including steel making which is where the so-called green steel comes from.
It is difficult to ship which is one of the issues but around the world it is seen as the energy source of the future.
By way of example, Forrest’s much vaunted CSIRO hydrogen project is a gas hybrid which to the purists is a step to the right goal but not the answer.
There are important details to the international viability of the project because green hydrogen will be in demand as a sustainable source of power and hence more valuable.
Just where the 47 countries being visited fit into the picture was also unclear unless maybe Forrest is thinking of building plants in different places, starting with the Pilbara where he will replace all diesel with hydrogen.
This is an exciting start on any read and potentially a new arm for Fortescue which is important so long as this is more than just marketing.
Fortescue is now half the market value of BHP which is extraordinary when you consider 17 years ago it was considered to be Forrest’s latest folly.
His next target is global oil major Chevron which is 4.2 times bigger than he is but given his track record this time Dr Forrest, as he likes to be called, has some credibility on his side.
Step one is to power the domestic iron ore operations including ships with hydrogen, and then the world.
All systems go
Hearts and Minds Investments is one of the top stocks on the bourse in the last week, up 10.2 per cent at $4.455 a share, to put the market value of the two-year old investment company at over $1bn.
Since inception the stock, which trades at a premium to its NTA, has returned 71 per cent against the MSCI world index at 21.2 per cent, and over the last 12 months 40.5 per cent against 2.4 per cent.
The run on the stock ahead of Friday’s fifth annual Sohn conference is based in part on the outperformance of its key investment ideas which last year have increased by some 66 per cent through the likes of Tesla, Spotify and The Trade Desk.
The Australian Sohn Hearts and Mind conference on Friday features more than a dozen local and international fund managers who pitch their top investment idea, with the top performers included in the investment company, comprising 35 per cent of the fund, with the other 65 per cent being ideas generated by half a dozen top local fund managers.
These include Byron Bay based Peter Cooper, Magellan’s Hamish Douglas, Will Vicars at Caledonia, David Paradice, Hamish Corlett from TDM Growth and Phil King from Regal.
The fund managers dominate the time and the investment management fee is donated to a range of charities including the Victor Chang Institute.
The fund has so far raised $20m and investors have had the opportunity to learn from some of greats about how they decide which stocks to back.
Fixed rates
Fixed rate mortgages are proving popular, accounting for around 40 per cent of new home loans for the CBA which like all the banks likes fixed rate loans.
If a customer takes out a four-year mortgage he or she is stuck there and is not about to jump ship to another member of the banking oligopoly.
CBA said deposits had jumped $15.8bn in the last three months to $580bn which is funding 74 per cent of all loans.
The banks don’t pay out a lot on deposits and can borrow from the RBA at 10 basis points so if you take one of the new CBA four-year mortgages at 1.99 per cent the bank’s profit on the deal works out at around 100 basis points.
The mortgage broker would probably get around 35 basis points and then there are bank costs to look after, but in the scheme of things given you are stuck on the rate for four years, can’t flee to a competitor without paying a fee and can’t cut the size of the loan, that fixed period loan means the bank is doing okay.
There is of course nothing wrong with banks making money and in fact the country needs profitable banks but the dynamics at play should be kept in mind next time the bank tells you it is here to help.
CBA’s first quarter profit was down 16 per cent on year ago levels at $1.8bn and CEO Magic Matt Comyn was understandably happy with the state of play.
He has the bank operating very well, increasing home loans at double system growth rates and business loans at more than double system. The bank tops all the right categories in terms of net promoter scores and is the only big bank to record a positive score for its retail bank.
ASIC appointment
This column erred in yesterday’s note on ASIC regarding the initial appointment of James Shipton as ASIC boss in 2017. The Treasurer at the time was present PM Scott Morrison but the announcement was made by then Financial Services Minister Kelly O’Dwyer.
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Read related topics:Fortescue Metals