Fortescue Metals Group Limited (ASX: FMG) shares are an interesting investment consideration. The company is no longer just a simple iron ore miner. It's planning to become a green energy giant through its division called Fortescue Future Industries (FFI). Hydrogen is a major part of the plans.
The company wants to become a "vertically integrated green energy and resources company".
It's investing in a range of renewable energy and new technologies so that its operations can become carbon neutral. It also wants to help heavy carbon-emitting industries like aviation and shipping to become net zero with green hydrogen and green ammonia.
Fortescue is investing heavily to make this happen. But when will it become a reality?
Fortescue Future Industries' green hydrogen plans
By 2030, Fortescue wants FFI to be producing 15 million tonnes of green hydrogen per year, with further production growth after that.
Starting from zero with a new industry is a big task. Fortescue Future Industries has set up a large number of potential projects and partnerships all over the world.
One of the first key parts of the plan is building its green energy manufacturing centre in Gladstone, Queensland, where it will make a number of the items needed for its green revolution. It's currently working on an electrolyser manufacturing facility, with first production expected in 2023.
The electrolyser facility isn't making green hydrogen itself. But, electrolysers are an important part of the green hydrogen-making process.
In terms of green hydrogen production, the Australian Financial Review reported that FFI CEO Mark Hutchinson, said:
I think the first green hydrogen we produce is probably going to come out of Australia, exported to Germany. Starting off in Gibson Island in Queensland, I would say Queensland will probably be the first cab off the rank to be honest.
In FY22, FFI completed the first phase of studies with Incitec Pivot Limited (ASX: IPL) to convert the Gibson Island ammonia production facility in Queensland to instead be powered by green hydrogen. Negotiations are continuing to finalise the front end engineering design.
Why did Hutchison say that the production would be exported to Germany? It's because Fortescue Future Industries has signed a memorandum of understanding with E.ON, one of Europe's largest operators of energy networks and energy infrastructure, to supply up to five million tonnes per annum of green hydrogen to Europe by 2030. In other words, E.ON could buy a third of FFI's 2030 production.
It was noted by the AFR that a large portion of the world's hydrogen exports will likely be shipped as ammonia initially because "ammonia is an easier substance to transport than pure hydrogen."
When will FFI start generating revenue by selling hydrogen or ammonia? The AFR quoted Hutchison, who said:
I'm really hoping we will have some available [in the] '24, '25 timeframe.
So, it seems that by 2025 Fortescue Future Industries will be generating revenue from green energy.
How is it funding these green initiatives?
Fortescue is allocating 10% of its net profit after tax (NPAT) towards FFI.
Fortescue Future Industries spent US$534 million in FY22 and currently has around US$1.1 billion of unused capital after the US$342 million allocation from the Fortescue net profit for the second half of FY22.
Fortescue share price snapshot
Since the start of 2022, Fortescue shares have dropped 7%.
