Fortescue Future Industries just inked a multibillion-dollar green hydrogen deal in Germany. Here's the lowdown

FFI expects to replace around a third of the energy Germany imports from Russia by 2030.

| More on:
Two people shake hands making a deal about green energy.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • Fortescue Future Industries has entered a deal with German energy giant E.ON that will see it supply Europe with up to 5 million tonnes of green hydrogen each year
  • That's enough to replace around one third of the calorific energy Germany imports from Russia, reducing Germany's reliance on the energy-producing nation
  • Fortescue Metals shares entered a trading halt on the news, which was broken shortly after with clarification on the deal's cost, initially said to be in excess of US$50 billion

This morning, the Fortescue Metals Group Limited (ASX: FMG) share price has exited a short-lived trading halt. The company was clarifying details around a deal made by its renewable energy arm, Fortescue Future Industries, to build a "hydrogen bridge" to Europe.

The deal will see Fortescue Future Industries supplying the continent with up to 5 million tonnes of green hydrogen annually by 2030.

That's enough hydrogen to replace around a third of the calorific energy Germany imports from Russia.

Fortescue Metals' shares went on ice this morning, pending an announcement release. That announcement clarified details around the potential cost of the deal.

At the time of writing, the Fortescue Metals share price is $19.58, 0.46% higher than its previous close.

Let's take a closer look at today's news from the iron ore giant's hydrogen-focused green energy entity.

Fortescue Metals share price thawed on cost clarification

The Fortescue Metals share price was put in the freezer this morning amid news Fortescue Future Industries has entered a memorandum of understanding with E.ON to supply Europe with green hydrogen.

It was inked in Berlin by Fortescue Future Industries and E.ON. E.ON operates one of Europe's largest energy networks and infrastructure and provides energy to 50 million customers.

The agreement caused chaos on the market this morning, with Fortescue Metals entering a trading halt before clarifying the details of its projected cost.

Fortescue Metals and Fortescue Future Industries chair and founder Dr Andrew 'Twiggy' Forrest initially told media the supply agreement will cost a minimum of US$50 billion (AU$66.6 billion).

In today's release to the ASX, the company stated:

The expenditure described is a high-level assessment by the chairman of what such a major
project may cost and is appropriate in the environment the statement was made to provide context
and scale of the potential of the [memorandum of understanding].

The company has made no commitment to the expenditure. What's more, any decision to spend that amount of cash would require approval from its board.

Fortescue Metals also said that, on top of its commitment to spend 10% of its net profits after tax (NPAT) on its green energy leg, it's working with financiers to confirm project funding for green energy.

More details on Fortescue Future Industries' 'milestone' deal

Fortescue Future Industries and E.ON will take to the books before the metaphorical shovel breaks any ground. They've agreed to research how to supply the renewable energy commodity as fast as possible.

Both have their sights on creating a 5 million tonne-per-annum green hydrogen supply chain.

E.ON CEO Leo Birnbaum said the partnership is a "milestone" in Europe's energy transition.  

"Two major international companies are joining forces to build a 'hydrogen bridge' from Australia to Germany and the Netherlands, based on shared values and the joint capability of realising the scale of such a project," said Birnbaum.

That "hydrogen bridge" will also help steer Europe away from its reliance on Russian energy fuel, said Forrest.

Fortescue Future Industries expects Australia will be the birthplace of much of Europe's future green hydrogen. FFI's other global projects will also have a role in the commodity's production.

E.ON will then distribute the energy commodity across Europe. There, it will help to decarbonise thousands of enterprises in Germany and the Netherlands, as well as other European cities and communities supplied by E.ON.

According to Fortescue Metals CEO Elizabeth Gaines, the deal is a "decisive step forward in FFI's journey to become one of the world's largest green energy producers."

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. 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.

More on Energy Shares

A man sitting at a computer is blown away by what he's seeing on the screen, hair and tie whooshing back as he screams argh in panic.
Share Fallers

Why did this ASX All Ords stock just crash 45%?

Investors are sending the ASX All Ords stock tumbling today. But why?

Read more »

Two IT professionals walk along a wall of mainframes in a data centre discussing various things
Energy Shares

What Bill Gates, ASX uranium shares and the AI revolution have in common

ASX uranium shares could be tapped to make up for banned Russian imports in the US.

Read more »

Man in yellow hard hat looks through binoculars as man in white hard hat stands behind him and points.
Energy Shares

Here's the earnings forecast out to 2027 for Pilbara Minerals shares

Can this lithium miner charge up its profit over the next few years?

Read more »

A miner stands in front oh an excavator at a mine site

3 reasons ASX uranium stocks can keep charging higher into 2025

I think the recent sell-down in ASX uranium stocks has been overdone. Here’s why.

Read more »

light bulb surrounded by green hydrogen and renewable energy icons
Energy Shares

What's put the wind up AGL shares on Friday?

AGL has outlined where it expects to invest for the energy transition.

Read more »

Emotional euphoric young woman giving high five to male partner, celebrating family achievement, getting bank loan approval, or financial or investing success.
Energy Shares

Why is ASX 200 uranium stock Boss Energy flying higher on Friday?

ASX 200 investors are snapping up Boss Energy shares today. But why?

Read more »

Three coal miners smiling while underground
Dividend Investing

Is the 11% dividend yield from Yancoal shares too good to be true?

Can you ever rely on an 11% dividend yield?

Read more »

sad looking petroleum worker standing next to oil drill
Energy Shares

Woodside shares hit a multi-year low this week, should you buy?

Is this oil and gas giant an unloved opportunity?

Read more »