Fortescue admits its clean energy projects will have lower rates of return than most iron ore growth options. But it’s determined to take a broad view of value
in the two weeks after he confirmed the company’s clean power projects would offer barely half the returns of its iron ore developments.
over the past four years, as it has strived to attach a clean energy and hydrogen business to its mature iron ore division. As far as competition for capital goes, there would be no contest between the mining and energy growth projects if the decision was based on a simple internal rate of return.But Hutchinson says the Fortescue board will take a broader and longer-term view of value when it decides whether to invest in the five clean energy projects later this year.
“The way to think about the first five is basically just priming the pump. What is really interesting for investors is the big megaprojects coming behind the first five, which we hope will be a better return,” says Hutchinson. But the silver lining for BHP will come when it expands Jansen’s production volumes into a second, third and fourth stage. BHP will be able to piggyback on the infrastructure built for the first stage of the mine and generate rates of return above 20 per cent for those expansions.
The other projects in the top five include the retrofitting of Incitec Pivot’s Gibson Island fertiliser plant near Brisbane.
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