‘World’s greatest concern’: Can Fortescue really help the planet AND its profit margin?

Hydrogen symbol with a globe.

Hydrogen symbol with a globe.

Fortescue Metals Group Limited (ASX: FMG) shares are in focus after the company’s CEO presented at the Diggers & Dealers Mining Conference.

The company has a goal of “taking a global leadership position in green energy and technology and is committed to producing zero-carbon green hydrogen.”

Fortescue’s plan is to produce industrial levels of hydrogen by using water and renewable energy.

It is transitioning to become an integrated, global green energy and resources company, together with Fortescue Future Industries (FFI).

The company has already signed a number of different deals for its future production of green hydrogen.

Global energy markets were rocked a few months ago when Russia invaded Ukraine, meaning that the energy landscape has “changed dramatically” and “energy security is now the world’s greatest concern.”

But, Fortescue’s CEO, Elizabeth Gaines, said that the energy crisis shouldn’t lead to a worsening of the climate crisis. She noted that crude oil was around US$70 a barrel 12 months ago, compared to US$100 per barrel now. This is having wide-reaching impacts.

But, Gaines said that in light of the situation, there is increased demand for green energy, particularly in Europe.

Green deals signed

By 2030, FFI wants to produce 15 million tonnes of green, renewable hydrogen annually.

E.ON, one of Europe’s largest operators of energy networks and energy infrastructure with 50 million customers, has signed a memorandum of understanding (MoU) with FFI to execute on the ambition to deliver up to five million tonnes of green hydrogen per annum. So, that’s a third of FFI’s planned production.

Gaines said that the E.ON deal is a “significant opportunity”. Green energy can ensure energy independence. This could play its part in supporting the Fortescue share price in the future.

FFI has also signed a MoU with Covestro, a Germany-based supplier of high-tech polymer materials. FFI plans to supply Covestro with the equivalent of up to 100,000 tonnes of green hydrogen.

Fortescue has also signed a deal with construction giant J C Bamford Excavators (JCB) and Ryze Hydrogen. The MoU is for 10% of FFI’s global green hydrogen production. This was a “multi-billion-pound” deal. Ryze is building the UK’s first network of green hydrogen production plants and Wrightbus (owned by Jo Bamford) has built the world’s first hydrogen double decker bus.

CEO comments

Gaines said:

We’re all facing significant inflationary pressures which impacts our margins — and, in fact, this could get even worse given the current geopolitical environment. So, it’s imperative for all of us to accelerate our transition to green energy and reduce our reliance on fossil fuels, so that we can protect and maintain our cost and our margins.

For our size and scale, there is no other mining company in the world that is taking the action we are to eliminate emissions.

We know it is when heavy emitters like us take action that it makes the biggest difference.

We plan to have Fortescue’s operations running on green energy within the next eight years. This includes our haul trucks, our iron ore trains and our power stations.

Industry must change its business model from producing emissions – to reducing and eliminating emissions.

She also commented how removing its reliance on fossil fuels makes long-term business sense. This could be helpful for the Fortescue share price. It’s developing an ‘infinity train’ that will use gravitational energy to recharge its battery electric systems without any additional charging requirements.

These efforts will “accelerate Fortescue’s race to reach net zero emissions by 2030” and lower “operating costs, creating maintenance efficiencies, and generating productivity improvements.”

Fortescue share price snapshot

Over the last month, the Fortescue share price has risen around 5%.

The post ‘World’s greatest concern’: Can Fortescue really help the planet AND its profit margin? appeared first on The Motley Fool Australia.

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More reading

Motley Fool contributor Tristan Harrison has positions in Fortescue Metals Group Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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