Billionaire Forrest’s green hydrogen venture FFI is a 'cash burn' and shareholders should sell up, says Credit Suisse
Swiss bank recommends ditching shares in highly profitable Fortescue Metals Group due to risks posed by opaque green H2 subsidiary Fortescue Future Industries
A concerning lack of visibility at Australian billionaire Andrew “Twiggy” Forrest’s green hydrogen venture Fortescue Future Industries (FFI) makes it hard to justify continued investment in its parent company, Fortescue Metals Group (FMG), and is undermining the iron ore magnate’s otherwise profitable empire, a major Swiss bank has warned.
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Forrest has clinched a litany of outline deals for FFI over the past two years, mostly memoranda of understanding (MoUs) and strategic partnerships with potential customers or governments, but has only publicly committed cash to a very few projects.
FMG is otherwise very profitable and “hard to fault” operationally, the two Credit Suisse analysts noted, but nevertheless downgraded its business rating to “underperforming”, meaning that its clients should sell.
Shares for the group have risen 50% since November, mostly on the back of positive outlooks for FMG’s iron-ore business and the potential for government subsidies for green hydrogen, but Credit Suisse believes that the upside has already been priced in and only risks remain, mostly related to FFI’s green hydrogen business.
“FFI projects may remain a cash burn into the medium-term, along with project execution risks, rendering a downward skewed risk profile, in our view,” the bank concluded.