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It could be worth $29b, but Fortescue won’t spin out FFI

Fortescue FFI

Fortescue Metals Group established its Fortescue Future Industries (FFI) arm in 2020, with the aim to not only decarbonise its own operations but also help decarbonise the world.

FFI is becoming a beast in itself, with Fortescue founder Andrew Forrest suggesting it could be worth $US20 billion ($29.4 billion) at the major miner’s recent FY22 investor call.

So why doesn’t Fortescue spin out FFI into its own entity?

Forrest said that while $US20 billion was the “overture” given to him to list FFI, it wasn’t in the company’s best interests.

“The two together gives us the greatest opportunity of being that world lead, that world example, that a heavy-industry company can actually materially reduce its operating cost, materially improve its margins by going green, by not smoking billions of dollars of cash each year in fossil fuel,” Forrest said.

Forrest said FFI would not only clad Fortescue, but see technology and knowhow exported to everyone else.

“We don’t intend … to lose value on that,” he said. “We are very careful about capturing the value for our shareholders but making sure we drive the commercial destruction of climate change, of global warming while building a really valuable business.”

FFI is targeting the production of 15 million tonnes per annum (Mtpa) of green hydrogen by 2030 – an immature energy source but one that’s critical to the net-zero narrative.

The 15Mtpa goal has drawn inquiries from the market, and JP Morgan analyst Lyndon Fagan questioned whether it was achievable on the investor call.

“We’re seven years away from that (15Mpta by 2030),” Fagan said. “We would need to be half of that in three years to even meet that. So I am wondering if you can try and help frame that target.”

FFI chief executive officer Mark Hutchison said the company was strongly placed on the supply side, with plenty of projects to choose from and potentially develop into the future. There was no further elaboration on this point.

As for demand?

“We already have a five-million-tonne MoU with E.ON, and there’s others in the works as well so I see no issue at all with the demand side,” Hutchison said.

“So I think the 15 million tonnes still stands for 2030.”

Hutchison said the world was embarking on “kind of the replacement of the entire fossil fuel network”.

“It’s almost like going back to 1907 when BP and Shell were formed and, you know, probably people then said, ‘Oh, you guys are crazy. It’s never going to work’. And history has told us that differently.

“We’re at that inflection point now, actually, and we (sic) got a massive market ahead of us so I’m very confident that the 15 million tonnes will be there.”

Hutchison said there was considerable international capital for green projects, with the world’s largest asset managers committed to funding the green transition.

“The geopolitical environment will only serve to speed this up,” he said. “Policy settings across Europe are helping to ensure that the production of green energy, and green hydrogen in particular, is competitive.

“The recent passage of the Inflation Reduction Act sees the US position itself as a potential green hydrogen superpower, and energy security is leading more and more countries to green energy solutions.”

FFI has experienced “significant” progress on several projects across its portfolio, including the construction of the Green Energy Manufacturing Centre in Gladstone, which is set to have its first electrolyser manufactured in 2023.

Hutchison said the company was also making great progress at its Gibson Island ammonia production facility in Queensland.

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