What do investors really think of Fortescue’s (ASX:FMG) green hydrogen push?

When investors think about the Fortescue Metals Group Limited (ASX: FMG) share price, they may be increasingly be focused on the green hydrogen push.

For readers that are unaware, Fortescue is one of the largest iron ore miners. But it’s now pushing into numerous green industry sectors.

Indeed, the company recently officially announced that it was transitioning from a pure resources company to a vertically integrated green energy and resources group.

It has an overarching green, fully renewable hydrogen initiative. Fortescue boasts that it now has the largest portfolio of green hydrogen, green ammonia, green iron ore, green iron and other green product developments in the world.

Some investors are loving the green shift

The Fortescue share price has gone up by more than 20% over the last month. Looking at the other two big miners, the Rio Tinto Limited (ASX: RIO) and BHP Group Ltd (ASX: BHP) share prices are up 10.2% and 13.1% respectively over that same time period. Fortescue is outperforming.

Speaking to the media, Fortescue CEO Elizabeth Gaines recently said according to The Australian:

If you track our share price over the last three, four years or longer, it will just match the benchmark. But more recently, in the last two to three months, we’ve seen that decoupling. We’ve actually outperformed the fall in the iron ore price and we outperform the peers.

Fortescue founder Dr Andrew Forrest says that Fortescue has approximately 170,000 shareholders. This number has doubled compared to a year ago. The increasingly green industrial business is seeing more environmental and ESG funds investing in Fortescue. The company’s leadership says that there are strong tailwinds of support across the investment community and the company is grateful for that.

Other investors are not a fan of Fortescue’s decarbonisation plans

However, whilst there may be a growing number of investors that are backing Fortescue, The Australian noted that there are some analysts and institutional investors that are feeling blue about the shift from Fortescue.

The newspaper reported that Morgans analyst Adrian Prendergast said to clients:

Questions are emerging over how much focus [Fortescue] is placing on renewables versus its core iron ore business.

The next five years in iron ore are likely to be more difficult than the last five years, warranting more focus or even possibly diversification into other mature markets. We…have lost conviction in the overarching strategy and capital framework.

Dr Forrest is not perturbed by some of the doubts by some quarters.

He pointed out to The Australian that Fortescue Future Industries has already made good progress with creating a green hydrogen fuel fell for a heavy truck and an ammonia-fuelled ship engine. Green trucks and trains will be operating at sites next year.

When talking about the huge sums of money needed to fund all of these deals, Dr Forrest said that he doesn’t need to own all of these green energy assets, just create them with FFI.

Fortescue Future Industries will create the renewable energy projects, then sell them at a profit to infrastructure investors and fund managers after cutting a deal to buy enough energy from the projects to produce green hydrogen. Reportedly, customers are “already lining up” for the offtake agreements.

Fortescue share price snapshot

Despite the resurgence of Fortescue shares in recent times, it’s still down 24% in 2021 with the iron ore price down roughly half from the peak earlier in the year.

The post What do investors really think of Fortescue’s (ASX:FMG) green hydrogen push? appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison owns 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 Bruce Jackson.

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