The Fortescue Metals Group Ltd (ASX: FMG) share price is up 0.5% amid the ASX resources share announcing progress with its green hydrogen plans.
Renewable power purchase agreement
Fortescue announced that, after a competitive process, it has entered into a power purchase agreement (PPA) with a subsidiary of Genex Power Ltd (ASX: GNX) for 337.5MW of new solar energy.
This PPA is intended to meet a portion of the renewable energy requirements for the proposed Gibson Island project in Brisbane. This agreement is for energy generated from the first stage of Genex’s Bulli Creek Solar Project in Queensland, proposed to be 450MW in size, which is being developed in partnership with Electric Power Development.
Fortescue said that it will secure the solar energy and renewable generation certificate at an agreed fixed price over a 25-year term.
This agreement is conditional on Genex achieving financial close on the first stage of its Bulli Creek solar project by 31 December 2024 and Fortescue reaching a final investment decision on the Gibson Island project by 31 December 2023.
How much green hydrogen will Gibson Island produce?
The plan is that the Gibson Island project will produce approximately 385,000 tonnes of green ammonia a year from the green hydrogen produced onsite through a 550MW hydrogen electrolysis facility. Once this facility is operational, it could be a boost for Fortescue shares.
One of Fortescue’s leaders said that the agreement would secure part of the renewable power required for the Gibson Island project as well as underpin the development of a new renewable energy project in Queensland.
The Fortescue Energy CEO Mark Hutchinson said:
This agreement is the first step in securing renewable power supply for the Gibson Island Project over the long term.
It is the first PPA for the project and finalising it is an important milestone in our pursuit of a targeted final investment decision this calendar year.
By entering this agreement we’re also helping Genex and J-POWER to deliver their project and bring new renewable energy capacity online in Queensland – close to 115MW from this first stage is surplus to our contracted share and will therefore flow back into the electricity grid.
Final thoughts on Fortescue shares
It’s good to see that the business is getting closer to making green hydrogen, with a lot of the renewable power now in place. Fortescue also has some customers lined up, including E-ON, now it just needs to start the projects and produce the green hydrogen.
I’d prefer to buy Fortescue shares at under $20 because of the cyclical nature of the iron ore price, but as a shareholder I was pleased to see this latest step.
