Andrew Forrest’s Fortescue Future Industries targets US expansion

Fortescue Future Industries is looking to ramp up investments in the US, encouraged by Biden’s US Inflation Reduction Act for green energy projects, says Andrew Forrest.

Fortescue Future Industries is looking at stepping up its investments in the US, encouraged by the incentives of President Biden’s US Inflation Reduction Act for green energy projects, according to Fortescue Metal Group executive chair Andrew Forrest.

Speaking at a conference in Sydney hosted by Deloitte on the impact of the US Inflation Reduction Act on Australia’s green energy future, Mr Forrest said the chief executive of Fortescue’s green energy subsidiary, Fortescue Future Industries (FFI), Mark Hutchison, had recently put three new projects for investment in green hydrogen in the US to its board.

While he described the projects as “significant” he did not provide more detail on them.

But he said the US legislation, which was passed last year, had created significant incentives for FFI to step up its investment in the US over its home base in Australia.

His comments come as FFI’s chief executive, Mark Hutchison, left on Wednesday for the meetings in the US.

Forrest’s comments come after the company recently told shareholders that FFI was looking at making decisions on a minimum of five new clean energy investment projects before the end of the year.

These are expected to include a green ammonia export project on Gibson Island in Queensland, a hydrogen project in Norway and another in the south west of the US.

Mr Hutchison was headed to Texas for his business meetings.

The former chief executive of AGL, Andy Vesey, is now chief executive of FFI’s American operations.

Mr Forrest’s comments come after the release of a report by Deloitte last week called Australia’s Hydrogen Tipping Point, the urgent case to support renewable hydrogen production.

The report warns that the development of Australia’s hydrogen market was at a “tipping point” with the country facing competition from the US, Europe and the Middle East, where players had a first mover advantage as a result of positive government policies.

The report recommends that the federal government encourage the sector with a hydrogen production credit of around $2/kg.

The federal government last week promised to review its national hydrogen strategy in response to the competitive pressure of the US Inflation Reduction Act which provides billions of dollars of incentives for new clean energy projects in the US.

Mr Forrest told the seminar that the legislation, which was a key policy of the Biden administration, had “completely changed the landscape” for FFI in favour of looking at more investment in the US.

“We are going to have to work hard to keep Australia competitive (with the US). I can see us (Australia) going backwards.”

FFI was set up in 2018 as a subsidiary of Fortescue, to focus on clean energy projects, with a particular focus on green hydrogen.

Mr Forrest told shareholders in 2021 that FFI’s expansion would be funded by an annual injection equal to 10 per cent of Fortescue’s annual earnings.

The company told shareholders in February this year that FFI had a war chest of $US793m as a result of the funding from FMG.

But analysts have been critical of the lack of detail on how FFI’s investments might generate earnings for the company.

Mr Forrest said Australia’s competitive advantage in green energy was “at stake” unless the Federal Government acted to encourage more investment in green hydrogen.

“I am deeply concerned that Australia will miss the bus,” he said. “We are fat and happy and have a relatively good lifestyle but the rest of the world is changing very fast.”

“We will miss a one off opportunity (to become involved in green hydrogen) if we don’t move. The scale of the opportunity is massive.”

But he said the billions of dollars worth of incentives in the US Inflation Reduction act was now seeing Australian capital and engineering skills being diverted to North America to focus on green energy projects.

He said Europe was now looking at ways to follow suit to meet the competition from the US in terms of incentives to invest in green energy projects including green hydrogen.

He said there was a “flight of leadership, capital and talent to the US” with Australia in danger of “missing the bus” on green energy investments.

He said Australia had about a year to get its policies right on green energy, particularly green hydrogen, or risked being left behind by developments in the US.

Mr Forrest said the leadership team at FFI was “now focusing on North America” for its new investments as it was becoming increasingly difficult to justify spending the capital in Australia where there were not the same incentives.

“If we put our capital in North America we can grow our business very quickly,” he said.

The global head of infrastructure and real estate, at BlackRock Alternatives, Anne Valentine Andrews, who spoke to the conference from New York, said the Inflation Reduction Act and other legislation recently passed in the US was encouraging investors to look at significant new investments in green energy projects.

“It is hard to overstate the importance of the IRA,” she told the conference.

She said BlackRock, the largest fund manager in the world with assets of more than $US10 trillion ($14.8 trillion), was now having many conversations with investors around the world on investing in green energy projects.

She said the legislation would see more than $US1 trillion worth of stimulus being pumped into the US economy.

“The flow of capital (into green energy projects) as a result of the IRA has increased exponentially,” she said.

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