The Fortescue Metals Group Limited (ASX: FMG) share price is rising after the iron and green energy business revealed a plan to become involved with importing green hydrogen into Europe.
While Fortescue is a major iron ore miner, it’s also aiming to become a big player in the green hydrogen space through its subsidiary called Fortescue Future Industries (FFI).
Fortescue’s latest green hydrogen move in Europe
FFI has entered a global collaboration with energy infrastructure developer Tree Energy Solutions (TES) which aims to accelerate the development of a “world-leading” green hydrogen and green energy import facility in Germany.
The investment of US$127 million will be funded by its unutilised capital commitment and provides FFI with a pathway for access to critical infrastructure to execute its strategy.
Fortescue Future Industries’ Netherlands business will invest US$29 million to become a shareholder in Tree Energy Solutions as well as invest US$98 million in the construction of the TES terminal in Wilhelmshaven, Germany. It will also become a major shareholder in a TES subsidiary by buying a 30% stake of the project company that will build the TES green energy hub in Wilhelmshaven.
How will this benefit FFI?
TES is developing a portfolio of terminals globally that will enable transportation of green energy.
The first phase of this partnership is to jointly develop and invest in the supply of 300,000 tonnes of green hydrogen with final locations being currently agreed, and a final investment decision targeted in 2023.
First delivery of green hydrogen into TES’ terminal in Wilhelmshaven, Germany, is anticipated to be in 2026. Initial collaboration projects will be focused on Australia, Europe, the Middle East and Africa.
FFI joins a group of investors in TES which comprises international financial institutions and multinational energy companies including E.ON, HSBC, UniCredit and Zodiac Maritime.
Funding
FFI had US$1.1 billion of unutilised of capital at 30 June 2022. To reflect the investment, FFI’s anticipated capital expenditure is revised to US$230 million, up from US$100 million.
Fortescue Future Industries’ expected operating expenditure of US$500 million to US$600 million is unchanged.
Management comments
The Fortescue Executive Chairman Andrew Forrest said:
The United Kingdom and Europe urgently need green solutions to replace fossil fuels and this investment will enable Europe to do exactly that. Not in 2050, but in four years from now.
From the beginning of FFI, our philosophy was to drive performance across the entire new renewable green hydrogen value chain while delivering returns to our shareholders. This investment reinforces this commitment and is a significant step forward in FFI’s journey to become one of the world’s largest green energy producers.
Final thoughts on the Fortescue share price
Fortescue shares have been rising over the past month. I’m not sure that now is the best time to be buying shares. I’d prefer to look at the business when the share price is under $16. But, this announcement is promising – FFI getting involved in helping get green hydrogen into the European energy system seems like a smart, accelerating move.
