Morgans see red ink over Twiggy’s green plans

Morgans has raised doubts about Andrew “Twiggy” Forrest’s expensive push into hydrogen, saying it could mean a long period of losses.

Jan 31, 2022, updated Jan 31, 2022
Premier Annastacia Palaszczuk and Andrew Forrest at Gibson Island

Premier Annastacia Palaszczuk and Andrew Forrest at Gibson Island

Forrest’s Fortescue Future Industries has kicked off two projects in Queensland – a catalyser factory in Gladstone and a study into converting Incitec Pivot’s Gibson Island plant into a hydrogen user. It also recently bought battery storage systems company Williams Advanced Engineering, an offshoot of the Formula 1 motorsport company for $310 million.

There were also plans to adopt electric trains at its iron ore operations in Western Australia and it has signed a long-term hydrogen supply deal with a German chemicals maker.

But Morgans analyst Adrian Prendergast said there were execution risks with FFI, including R&D risk.

“Fortescue Metals continues to pursue what we see as a very aggressive push into a large number of ESG-themed industries in different geographies,” Prendergast said.

“Our concern here is FMG’s low starting point in each of the new markets it is pursuing, which suggest capital efficiency will be the first victim before getting to any considerations artound the long-term return profile.

“With the potential for the steel activity to mature in 2022, we are interested to see how FMG’s large ESG themed framework sustains a downcycle in iron ore.

“While seeking to diversify outside iron ore, we would argue the move into FFI (which would see a long period of losses while FMG is established), is actually equivalent to increasing FMG’s dependent in iron ore earnings.”

InQueensland in your inbox. The best local news every workday at lunch time.
By signing up, you agree to our User Agreement andPrivacy Policy & Cookie Statement. This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

Morgans is not alone in its bearish report. Citi, Credit Suisse and Goldman Sachs have all been negative on the plans.





Local News Matters
Copyright © 2024 InQueensland.
All rights reserved.
Privacy Policy