Fortescue seeks government help to reduce power prices for stalled 500MW green hydrogen project in Australia
Australian H2 developer has already delayed final investment decision three times on landmark Gibson Island project
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In an analyst call following the presentation of Q1 2024 results, which mainly concerned the company’s iron-ore business, Hutchison was asked when Fortescue was planning to make a final investment decision (FID) on the 500MW Gibson Island project, which it has already delayed three times.
“We’ve made it pretty clear that really the issue we’re dealing with is around the power price and we’re encouraging the Australian government to do all it possibly can to get the power price in Australia down, particularly on the east coast [where Gibson Island is].
“We’re working very closely with the government on Gibson Island. Otherwise, it’s a good project and we’ll let you know once we’ve made a final decision on that one, but we’re working closely on getting the price down of the power.”
A follow-up question asked whether the price problem was related to bulk power price — for which it had already secured a 337.5MW solar power purchase agreement with developer Genex — or the dispatchable power it might need to access when the sun isn’t shining.
“Honestly, it’s both,” Hutchinson replied. “We want to make sure that to get the right economics that we get the power price down to a level where we produce the hydrogen and we don’t want to be switching the plant on and off as much as possible, so we’re really looking at getting the power price for both down, yes.”
Brazil and Norway
Hutchinson also told the analyst call that its next green hydrogen projects to reach FID will be the “larger” ones in Norway and Brazil.
In particular, Fortescue is “fast-tracking” one project in Brazil and another in Norway, he added.
“It’s cheap power we’re looking for and where you have consistency, for example, for hydro[power], where’s you’re taking it straight from hydro resources, you know, that’s what we’re doing in Norway and Brazil. That’s very, very efficient.”
Its Norwegian project is the 300MW Holmaneset project near Svelgen, western Norway, which would produce more than 225,000 tonnes of green ammonia annually.
In Brazil, the company is developing the three-phase 2.1GW Pecem project in Ceará state, producing around 1.7 million tonnes of green ammonia a year’.
Spending cuts
Fortescue revealed in its Q2 2024 results that it had reduced its planned spend for its hydrogen-based energy arm for the full-year 2024 from US$800m to US$700m, largely due to “cost saving initiatives”.
“We are strategically focused on building out our Energy business while, at the same time, focusing on bringing down opex [operational expenditure] in line with Fortescue’s values and to make sure we have the right financial discipline,” said Hutchinson during a conference call on the results. “This is demonstrated by the reduction of US$100m in our opex guidance for Energy for this year.”
He later expanded on this opex cut, telling the analyst call: “I think a year in our space is a long time and I’d say we’re getting a lot better at really what we’re doing and an understanding of where we need to spend the money.
“So, I think, in true Fortescue fashion, one of our values is frugality, and we are very conscious of the money that we spend. We’ve worked very hard to make sure that we’re spending in the right areas, so that’s a big part of it, and that has nothing to do with head count reduction.
“It’s all to do with efficiency of using the capital and also making sure that we have enough fire power for the years ahead and we start to spend on the right things. We’re not slowing down at all, it just is we’re getting better at the way we spend our money.”
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