Fortescue believes its green energy push will lead the market to re-rate the stock to make it twice as valuable as it is today. Investors need more convincing.
Fortescue’s big green switch is about many things: saving the planet, creating a new Australian industry, and, not to put too fine a point on it, enlarging Andrew Forrest’s legacy.
“In some ways, the earnings on the energy side are worth more to the market. than on the mining side,” Hutchinson says. For a theoretical project with $100 energy project, it is planned about $60 will be non-recourse debt and $40 will be equity, with Fortescue then tapping sovereign wealth funds for between 50 and 75 per cent of that equity. That should lift the rate of return more towards the mid-teens, Hutchinson says. In addition, most of the energy projects will be staged, and the latter stages should offer higher rates of return.
This column asked Otranto whether the team at Fortescue’s mining business have bought into the group’s green dream, given their side of the business will effectively be required to provide the seed funding for the hydrogen projects. He is categorical.
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