Why is Fortescue Metals Group, which makes most of its income from iron ore sales, looking at renewable energy projects in Papua New Guinea and other parts of the world? The move is an attempt by Australian company to ‘get in front of the curve’, as the world moves towards a low carbon economy.

Fortescu’s zero emissions vehicle Hyzon5. Credit: Fortescue Metals Group Ltd

In August 2020, at the height of global COVID-19 lockdowns, the Chairman of Fortescue Metals Group, Dr Andrew Forrest, did something few business people were able to do at the time: he and a team including Fortescue Future Industries (FFI) CEO Julie Shuttleworth, obtained exemptions to leave Australia and took a private plane to Papua New Guinea and Indonesia.

The trip was part of a five-month odyssey during which Forrest and his executives visited more than 47 countries.

Shortly afterwards, FFI announced it had signed a ‘deed of agreement’ with the PNG Government and its state-owned enterprise holding company Kumul Consolidating Holdings (KCH) ‘to promptly investigate the feasibility of potential projects for development of PNG’s hydropower resources.’

‘The plan was to get in front of the curve. We knew that the world had to – not want to, had to – go green.’

One of the projects under consideration is the massive Purari River hydro, a project that has long sat on state-owned Kumul Consolidated Holdings’ wish list due to its potential to generate more electricity than the entire country currently consumes.

Purari River: Credit: Origin Energy

Notably, under the deed of agreement, ‘individual projects will be developed by Fortescue Future Industries with ownership and project finance sources to be separately secured without recourse to Fortescue.’ FFI would develop the projects but the money would be coming from somewhere else.

A second deed of agreement between PNG and FFI was announced earlier this month, expanding the types of renewable energy projects to be considered to include solar, geothermal, wind and gas.

It is worth noting that PNG is not the only country that FFI is doing deals with. Last month, it signed a deal to develop green energy projects in India.

Why renewables?

Fortescue Metals Group’s Dr Andrew Forrest.

Why is an iron ore company exploring renewable energy projects, no matter where in the world they may be?

Forrest himself articulated the reason for his global travels in a recent Bloomberg interview.

‘The plan was to get in front of the curve. We knew that the world had to – not want to, had to – go green. So, we went to all the countries across our little planet where renewable energy can be generated at huge scale.’ The goal is to use that energy to create ‘green’ hydrogen, ammonia and electricity.

Forrest describes green energy as ‘Fortescue’s mission in life now’, especially hydrogen. Globally, FFI expects to invest between AUD$540 million (K1.35 billion) and AUD$810 million (K2 billion) on green projects in the next 12 months alone.

‘The time has come. Green hydrogen is going to have its day,’ he says.