Fortescue Metals Group takes a step towards issuing green bonds for major projects
With billions of sustainability projects in the pipeline, the global miner might look to tap green debt markets to fund its ambitious plans.
Fortescue Metals Group has flagged plans to issue green bonds to fund future plans to decarbonise its own operations and build the massive pipeline of hydrogen and renewable energy projects has earmarked through its Fortescue Future Industries (FFI) subsidiary.
Fortescue released a sustainability financing framework to the market on Tuesday, pitching its credentials to green debt markets as it looks for ways to fund future sustainability projects.
While Fortescue has not signalled any attention to tap green financing markets in the near future, The Australian revealed on Monday the total cost to build even a proportion of FFI’s project pipeline could top $US145bn ($A196bn)
Fortescue said on Tuesday, ahead of its annual shareholder meeting in Perth, that the framework is designed to allow the company to tap debt “green, social, and sustainability financing instruments” – including bonds, loans, bank guarantees, letters of credit, and asset backed securities.
The company said it could use the proceeds of any debt raised to fund capital and operating spending for FFI projects, the acquisition of renewable energy and sustainability focused companies, and decarbonisation projects planned by Fortescue for its iron ore operations.
Chief financial officer Ian Wells said the release of the framework recognises the growth in the funding markets powered by sustainability-focused investors.
“It is designed to further optimise our capital structure and, together with our disciplined approach to capital allocation, will provide for the continued delivery of value to our stakeholders,” he said.
Fortescue also flagged the use of green debt to fund energy intensive magnetite iron ore projects such as its Iron Bridge project in the Pilbara, where the project has “at least 20 per cent higher energy efficiency than conventional magnetite processing”.
The framework also puts a structure around Fortescue’s promises that any FFI projects that get the go-ahead will raise their own debt and equity, secured against the assets under construction, with no recourse to the iron ore major’s own balance sheet.
The company said it would use any funds raised towards renewable energy generation development, energy efficiency projects, green hydrogen and ammonia plants, green transport solutions and “eligible social projects”, including procurement spending with Indigenous-owned companies.
Fortescue joins a long list of major corporations looking to tap debt investors focused on sustainability and environmentally friendly projects.
US corporations raised about $US47bn through issuing green bonds in the first 10 months of 2021, according to a recent report in the Wall Street Journal, and global sales of green bonds have so far topped $US447bn – nearly double the $US234bn raised in 2020, according to Bloomberg.
Billionaire packaging magnate Anthony Pratt’s US business has long trumpeted the use of 30-year green bonds to fund its North American growth, and on Tuesday Ford Motor Company broke US green bond records by selling $US2.5bn worth of 10-year debt, having gone out the market looking for only $US1bn.
Fortescue shares were up 18.5c to $14.515 at 1315 AEST.
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