Fortescue is best known for its iron ore mining operations. It also has a growing division called Fortescue Future Industries (FFI) which is aiming to be a major producer of green hydrogen and green ammonia, but it is also looking to grow the Williams Advanced Engineering (WAE) battery division.
US battery plan
According to reporting by the Australian Financial Review, Fortescue is going to set up a battery manufacturing hub in the US as the business looks to capitalise on the US’ Inflation Reduction Act, which actually has a large focus on boosting decarbonisation spending and investment.
The idea is that WAE will make batteries, electric vehicles and trains for Fortescue, and that it will be set up in the US.
The AFR quoted Dr Forrest in London this week, who said:
This is very real. We’re mobilising capital, equipment and expertise.
In the United Kingdom, we have a record of expanding WAE very significantly since we purchased it. But we will put even greater capital into the Uited States, where the incentives just make it inordinately difficult not to invest there.
It’s absolutely IRA-driven. If you have external shareholders that you’re responsible to, you have to develop manufacturing capability around the world, but particularly in the United States because the incentives are so significant.
Tapping into this could be a boost for the Fortescue share price.
Fortescue’s WAE in the UK will eventually switch to focus on supplying truck makers in Europe.
Renewable energy spending
The AFR also reported that Fortescue Energy will build an estimated US$20 billion of renewable energy projects, with another US$30 billion for projects under advanced study in Africa, Australia, Europe and Latin America. This will be funded by “green structured finance global capital markets.”
Final thoughts on the Fortescue share price
Fortescue shares remain elevated compared to prior years, so I wouldn’t call it great value right now, with the iron ore price above US$110 per onne.
But, I like the moves that FFI is making to grow its scale and become further involved in the global decarbonisation efforts. If things keep going well, this could turn into a major earner for Fortescue. I’m a happy shareholder.
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