Fortescue has decided to stop the appropriation of 10 percent of its net profit after tax (NPAT) to fund Fortescue Future Industries (FFI), a move that would push the green energy arm to compete with other divisions for capital.
“We’re at a point where projects have to compete because we want to make sure we get the best results for our shareholders, and the capital will go where we get the best returns. So that’s the way we’re thinking, very much about how we allocate capital going forward to the Metals business and to the Energy business,” Fortescue Future Industries CEO Mark Hutchinson said during an investor and analyst call on Aug. 28.
In a security filing, Fortescue said that the policy of using 10 percent of its NPAT to fund FFI “will no longer apply, and all projects and investments will be assessed on their own merits consistent with Fortescue’s capital allocation framework.”
The announcement comes as Fortescue Energy, which comprises FFI, Fortescue WAE, and Fortescue Hydrogen Systems, is aiming to deliver five final investment decisions by the end of the 2023 calendar year. The company had earlier disclosed its intention to pursue Real Zero, which means no fossil fossils and no offsets.
“As a business, we are driving green energy projects at scale and speed. Our delivery timetable means we need to focus our efforts on those that make the most commercial and economic sense. We are committed to progressing projects to FID this year,” Mr. Hutchinson said.
“As outlined a few weeks ago, projects in Australia, the U.S., Brazil, Norway and Kenya are tracking well. We do have others in the global portfolio as well.”
The company noted that it has advanced offtake discussions with customers from Australia, Europe, America, and Asia for green hydrogen and derivatives.
Fortescue to Stop Buying Carbon Credits
Also, in line with the green energy plans, Fortescue said that it would no longer purchase voluntary carbon offsets unless the law requires it.
Fortescue reported a 23 percent decline in NPAT to US$4.80 billion (A$7.45 billion) in fiscal 2023 from US$6.20 billion in the previous year, which includes a US$726 million impairment charge related to its flagship Iron Bridge magnetite project.
The company noted that the assembled plant, pipelines and infrastructure, pilot and demonstration plant costs, capitalised interest, and increasing discount rates contributed to the impairment.
“Other factors impacting the Iron Bridge cost base are inflationary impacts on construction and supply chain delays, offset by the increasingly strong outlook for future product prices,” the company added.
Fortescue said that the project, whose cash-generating unit has a book value of US$3.5 billion as of June 30, 2023, remains as an essential asset for the company. Iron Bridge started production of high magnetite concentrate in May, and the first concentrate from the project was loaded on the ship in July.
The mining company’s revenue slid three percent to US$16.87 billion from US$17.39 billion.
The company booked US$3.18 billion in capital expenditures and investments during fiscal 2023, including US$1.4 million allocated to sustaining and hub development, US$233 million in exploration and studies, US$949 million in major iron ore projects, and FFI’s US$394 million spending.
Meanwhile, Ms. Fiona Hick has departed her role as Fortescue’s chief executive. The company has appointed Dino Otranto, formerly chief operating officer, as the new CEO.