Nick Evans
Fortescue’s new green energy boss Mark Hutchinson promises project announcements this year
At last, Fortescue shareholders may get some answers on when the company will actually start building any of the green energy projects that Andrew Forrest says will become the core of its future business.
After the company made the second-biggest profit in its history, Forrest fielded surprisingly few questions from analysts on Monday on the company’s financial position, or on the health of its iron ore business.
Instead Forrest and his executive team were again peppered with questions about its green energy start-up.
There’s probably a pretty good reason for that.
Fortescue’s green energy subsidiary, Fortescue Future Industries (FFI), has only eight years to make good on Forrest’s plan to be producing 15 million tonnes of green hydrogen a year by 2030.
That seems like a long time, but even the simplest of renewable energy projects can take three years to win approval and get and build in Australia – and the mega-projects needed to feed the scale of Fortescue’s ambitions will probably need far more time.
It already has agreements to sell seven million tonnes to a variety of buyers.
But FFI has, according to Fortescue’s annual report, 120 different development projects under consideration in 40 countries.
Again, Fortescue provided little detail on what those projects are, where they are, or on the company’s efforts to winnow down the list.
In reality, the only details available are the ever-growing costs of Forrest’s green vision.
Fortescue Future Industries had 1122 staff at the end of June – more than double the 500 it employed in October 2021.
FFI is allocated 10 per cent of the miner’s total net profit after tax, and had a $US1.1bn ($1.6bn) war chest available at June 30.
FFI’s budget this year is about $US100m for capital spending, and $US600m to $700m on operating costs – up from $US148m and $US386m, respectively, last year.
Even though the annual report notes that studies on green hydrogen projects were “progressed and completed” during the year, shareholders were not given details on any of them – good or bad.
And there are worrying signs for the few projects where FFI has set public deadlines.
Its green iron and iron ore electrolysis project is “several months behind schedule”; heavy equipment trials for Fortescue’s Green Fleet deployment are “mostly” tracking for deployment by the end of the year; and Fortescue’s carbon emissions went up for the year, not down.
Other projects, such as Fortescue’s plans for a green ammonia production hub in Bell Bay in Tasmania – once set to be the company’s first investment decision on a green energy project – have simply disappeared.
But there is hope on the horizon for dubious Fortescue shareholders.
New FFI boss Mark Hutchinson promised analysts there would be firm announcements on projects by the end of the year. That is a promise the company must keep.
And as for Forrest’s claim that bankers had pushed for a spin-out of FFI, valuing the company at $US20bn – half the total value of Fortescue itself?
If such an approach had been made, surely even the nodding heads on Fortescue’s board would have realised that might be a material matter requiring some sort of disclosure to the market.
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