The Fortescue Metals Group Ltd (ASX: FMG) share price is up 1.67% in late afternoon trade, after potentially exciting news regarding its battery efforts.
For some context about the company's battery operations, in January 2022, Fortescue announced the acquisition of battery business Williams Advanced Engineering for approximately US$223 million.
What does WAE do?
The UK-based business was acquired because it provided "critical technology and expertise in high-performance battery systems and electrification".
Fortescue gave two key reasons for the acquisition – it would support the decarbonisation of Fortescue's mining operations "as well as establishing an important new business growth opportunity".
WAE and Fortescue are developing battery electric solutions for Fortescue's "rail, mobile haul fleet, and other heavy mining equipment". It's part of Fortescue's plan to decarbonise its mining operations by 2030.
In the 2021 calendar year, WAE made US$84 million in revenue.
WAE is an important part of the overall effort to decarbonise Fortescue and the world, alongside Fortescue's green hydrogen venture Fortescue Future Industries (FFI).
What's happened today to boost Fortescue shares?
It has been reported by the Australian Financial Review that FFI is trying to tap into the benefits of the huge US$369 billion Inflation Reduction Act, which includes significant US government support for green energy efforts.
WAE now has three sites in Oxfordshire in the UK, but it could soon become a much bigger operation with plans for a "battery manufacturing hub" in the US. The AFR said the decision to set up the US operation is "close at hand", with a location in the US "almost in the bag."
On Monday, in London, Andrew Forrest told the AFR:
This is very real. We're mobilising capital, equipment and expertise.
In the United Kingdom, we have a record of expanding WAE very significantly since we purchased it. But we will put even greater capital into the United States, where the incentives just make it inordinately difficult not to invest there.
It's absolutely IRA-driven. If you have external shareholders that you're responsible to, you have to develop manufacturing capability around the world, but particularly in the United States because the incentives are so significant.
What's so good about the Inflation Reduction Act?
Once WAE is set up in the US, the Oxfordshire operations will switch to focus on supplying truck makers in Europe.
Forrest believes that the Inflation Reduction Act's funding, with a substantial portion going to Republican states, will continue even if the presidency changes in the 2024 election.
The Inflation Reduction Act provides businesses with subsidies, grants, and tax breaks if they set up in the US and their operations are related to the transition to clean energy.
Fortescue share price snapshot
Over the past 12 months, the Fortescue share price has gained 28% as we can see on the chart below.
