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Fortescue Metals Group Chairman Andrew Forrest
Source: Fortescue Metals Group

Fortescue Metals Group Ltd. is not expected to see a shortage of willing investors to help finance its ambitious plan to produce renewable energy, an Australian mining specialist fund's managing director said.

Fortescue Chairman Andrew Forrest revealed plans at the iron ore major's Nov. 11 annual general meeting to develop 235 GW of installed renewable energy across the globe, with no timeline stated, though he committed to spending A$1 billion on decarbonization and hydrogen technologies through 2023.

Forrest said the 235-GW target would surpass the relative installed capacity of Chevron Corp. and Total SE, compared to those oil majors' 2019 oil production converted to gigawatts, on an energy equivalent basis.

Fortescue will do the preliminary work of identifying and assessing the projects using internal resources, but any major investment to build a project would be done off its balance sheet with direct security over the asset in question.

Forrest presented a "flywheel" for the new group to drive the goal, called Fortescue Future Industries, indicating a focus on securing the best renewable assets and optimizing green hydrogen carrier technology to develop the first 100 GW.

It will then work on reducing costs, increasing cash flow and driving increased demand and expanding its renewable and green hydrogen capacity. He said the plan would start with renewable energy to power its fixed plant then move to its trains, trucks and ships.

Forrest said every step along the production chain produces carbon emissions and operating costs and heightens efforts the company is making in the Pilbara to reduce them. These efforts include plans for a multi-gigawatt hydrogen and ammonia system connected up with power to eliminate up to a billion liters of diesel a year, he said.

Once Fortescue has created sufficient renewable energy and fuels where it can guarantee, like the oil and gas sector, reliability of supply at volume and scale, Forrest said there will be a "veritable stampede of companies all over the world to switch from fossil fuels to renewable energy and save on operating costs in the process."

Karen Boyce, who spent 25 years ensuring that businesses with major hazard facilities are environmentally sustainable, has also joined Fortescue as energy projects approvals manager to aid in implementing the plans.

Rich green investment climate

As evidence of the rich investment appetite for the goal, Forrest cited the European Union's Green Deal whereby member states agreed to target net-zero emissions blocwide by 2050 and €1 trillion of investments over the next decade to achieve it and cited U.S. President-elect Joe Biden's four-year, US$2 trillion green infrastructure stimulus plan.

Matt Fifield, managing director of mining specialist investor Pacific Road Capital, whose two funds have US$776 million in commitments combined, said such government plans, along with China's pledge to be carbon neutral by 2060, will accelerate those countries' focus on metals supply chain resilience.

This is particularly the case given that metals are used for renewable energy and other strategic infrastructure.

"If metals are energy, energy is political, and across the board, governments are much, much more involved in thinking about the metals supply chain — either directly or through their national champions [such as Japan's JOGMEC] — than they've ever been in my lifetime," Fifield told S&P Global Market Intelligence.

Forrest said Fortescue would only work with governments that "do not tolerate modern slavery" nor condone forced, bonded or compulsory labor nor forced marriage and child marriage.

Fifield said Fortescue's execution capability in mobilizing capital, people and infrastructure, compared to many smaller renewable energy developers, is "very attractive for private capital" amid an "extraordinarily high appetite" at present for renewable infrastructure investment.

"Most of the allocators we talk to and work with are increasing their allocations to infrastructure looking for hard assets and yield, and that includes renewables," he said, pointing to superannuation and pension funds, endowments and high-net-worth individuals, plus government-related entities and sovereign wealth funds.

Fortescue CEO Elizabeth Gaines told the meeting that "we haven't made any capital investment decisions in this initiative at this point in time."