Australian mining magnate plans global green energy drive
Australian mining magnate Andrew Forrest has outlined ambitious plans to build a renewable energy business, aiming to compete with oil giants to provide low-cost green energy globally.
The billionaire owner of Fortescue Metals Group – the world’s fourth-biggest iron ore miner - says Fortescue Future Industries (FFI) has signed preliminary deals in countries like Papua New Guinea, as well as in African countries, and a team of executives is looking for other partners.
“We are building a portfolio of renewable assets, energy producing assets around the world,” Forrest, Fortescue’s chairman, told the company’s annual meeting via video link from Paraguay, according to a Reuters report.
He adds that Fortescue has already committed £550 million out to 2023 for the project and expects to use off-balance sheet financing for it as well.
“With scale and innovation, we will be able to ramp up supply of green hydrogen and green ammonia to deliver low cost energy reliably at industrial scale to customers all over the world,” he states, explaining that hydrogen and ammonia fuel cells are set to be used in transport and shipping, ammonia in fertiliser and hydrogen also in steel making.
Forrest, whose net worth is estimated at around £13 billion, says that the company’s initial target would be to have 235 gigawatts (GW) of installed energy capacity, but did not provide a timeline for when this would happen.
Gero Farruggio, head of global renewables at research firm Rystad Energy Farruggio, says that such a target would be extremely challenging to achieve, pointing out that energy major BP, by comparison, plans to produce 50GW of renewable energy by 2030.
Despite the coronavirus pandemic, Forrest has been touring the world and says that executives have visited 23 countries to shortlist partners for the venture, and plan to visit 24 more, with investments tied to human rights obligations and equal opportunities.
Fortescue has committed its own operations to be carbon neutral by 2040 and has been accumulating licenses and patents during the last five years to further its plans.
Forrest’s net worth has tripled over the last year, according to Australia’s Financial Review Rich List. Fortescue posted a net profit of £3.5 billion in 2019, due to a mix of high prices for iron ore and better margins for its products.
BHP deliberates ditching fossil fuels for greener mining
The world’s biggest miner, Australian-based BHP, is supposedly considering withdrawing from a multi-billion dollar contract, which would see the company generate more than US$2bn due to mounting pressure over aligning its business with ongoing climate concerns and ESG-compliance measures.
Exiting the agreement would mean BHP escalate its distancing from oil and gas and subsequently cut down on the amount of fossil fuels used by the company when mining.
It’s estimated that the petroleum business being debated upon could actually be worth around US$15bn but is still under talks to be put up for sale.
Global Mining Giant Considers Greener Future
BHP has made itself clear that it wants to avoid becoming unable to sell its assets. As competition within the market increases following higher numbers of oil giants wrestling with investors to deal with climate pressure, so too are the number of mining rivals looking to make environmental changes for the future.
However, BHP currently has the upper hand as a stalwart mining company that established itself back in the 1960s, allowing it the time to grow and dominate over other fast-appearing mining competition.
Mike Henry, BHP Chief Executive, has an optimistic outlook for the future of oil and gas despite worries over rising demand to align his business with the Paris Climate Agreement. Henry argues that prices remain promising due to a lack of industry-wide investment.
BHP’s petroleum business won’t be easy to say goodbye to. Forecasted to generate around 6% of profits during the ongoing financial year (US$2bn), and around US$1.6bn revenue produced by BHP petroleum in the six months leading to December 2020, BHP is due to take a hit no matter what agreement they choose.
On the other hand, distancing itself from thermal coal and petroleum would arguably aid the company’s case to possible - and valuable - investors who may be required to fund BHP’s increased output to places such as Australia and Mexico in the near future.
BHP considers cutting billion-dollar contract to aid climate
An exit away from petroleum has the potential to be “a powerful corporate catalyst,” says Dominic Kane, Analyst at JP Morgan.
“We believe an exit would likely ring-fence BHP’s exceptional cash flows for non-fossil fuel organic growth, mergers and acquisitions and generous shareholder distributions since BHP could avoid a major new capital investment phase this decade in petroleum.”
BHP is also set to sanction a giant US$5.7bn Canadian potash mine in August of this year, already seeing potash as a long-term substitute for gas and oil going into the future. The company has also previously announced plans to abandon its 80% share in its joint endeavour with Mitsui, owner of two lower-quality mines in Queensland, Australia.
BHP is scheduled to report its annual results on August 17, after which it may become clearer on whether the company will choose to focus its shift to a low-carbon economy or whether it will stay with its current contract into the coming year.