There has been one deal announced within the last month that could make Fortescue Metals Group Limited‘s (ASX: FMG) Fortescue Future Industries billions of dollars.
If you haven’t heard of FFI before, it is the green division of Fortescue which wants to take a global leadership position in the renewable energy and green products industry space. It has a vision to make green hydrogen the most globally traded seaborne commodity in the world.
FFI has announced various feasibility studies and memorandum of understanding MOU) agreement partnerships.
The Queensland green energy manufacturing (GEM) centre was certainly an important announcement. However, there was one in particular that could lead to billions of dollars for Fortescue Future Industries:
Fortescue Future Industries signs agreement with JCB and Ryze Hydrogen
FFI is going to become the largest supplier of green hydrogen to the UK after signing a “multi-billion-pound” deal with construction giant J C Bamford Excavators (JCB) and Ryze Hydrogen (Ryze) within the last month.
JCB and Ryze are going to purchase 10% of FFI’s global green hydrogen production.
FFI’s green hydrogen production is expected to increase to 15 million tonnes of green hydrogen per year by 2030, and then growing to 50 million tonnes per year in the next decade after that
Fortescue Future Industries will lead the green hydrogen production and logistics to the UK market, and JCB and Ryze will manage green hydrogen distribution and development of customer demand in the UK.
Management comments
FFI Chairman, Dr Andrew Forrest, said:
“This landmark, first of its kind partnership will help the UK to achieve net zero, particularly in the hard to electrify sectors.
“Our agreement signals the first major shift in the global commercial landscape from fossil fuels towards the real, practical, implementable solution that is green hydrogen.”
Dr Forrest added that replacing fossil fuel with only two million tonnes of green hydrogen is the equivalent of taking over 8 million cars off the road, which is almost a quarter of the UK’s entire fleet of cars.
JCB Chairman Lord Bamford commented:
“This is an important step towards getting green hydrogen to the customer. It’s fine having an engine powered by green hydrogen, but no good if customers can’t get green hydrogen to fuel their machines. This is a major advance on the road towards making green hydrogen a viable solution.
“This is a monumental deal, not just for us but for the UK as a whole. We have chosen to partner with the global leaders in green hydrogen…Production of it can commence at once, to meet the needs of all mobility. I have asked Andrew to deliver to me immediately that he has the capacity, and he has agreed.”
European deals to come?
An extended offtake agreement will also be evaluated to provide green hydrogen to the European market, and the parties have agreed to evaluate collaboration opportunities to accelerate green hydrogen demand and establish green hydrogen and green industry manufacturing centres.
My thoughts on this deal for Fortescue Future Industries
FFI has been announcing a number of promising agreements. But I think this talk of a multi-billion-pound deal. It’s what could really get the ball rolling economically, in a revenue and profit sense, for FFI.
I am a shareholder in Fortescue right now. I wish I could have bought more shares a few weeks ago! These green initiatives are very promising in my opinion. I’m looking to buy some more shares, though the rising Fortescue share price doesn’t quite match the strength of the iron ore price.
