“In that environment you’re not going to bring in major sources of green hydrogen, which relies on cheap energy prices,” he said.
“We are not going to swim against the tide.”
Few customers for green hydrogen
The Albanese government promise of $6.7 billion of production tax credits for hydrogen arrived barely a year after pumping $2 billion of taxpayers funds into the Hydrogen Headstart policy.
And energy sources say Japanese importers are increasingly looking at hydrogen only as a long-term alternative, preferring in the nearer term substitutes that are compatible with existing transport and utility infrastructure.
Grattan Institute energy policy director Tony Wood said: “The reality is that the queue of people being prepared to pay Twiggy Forrest a lot of money for green hydrogen is not very long.”
Green hydrogen is made by using renewable energy to split water into its constituent parts, and Fortescue had shaped as a likely beneficiary of those federal schemes.
But Dr Forrest said Fortescue would in the immediate future focus on generating and distributing clean power, rather than use that clean power to make hydrogen.
“We’re going to stay where we know we can win, and that’s green electricity. Nothing beats green electricity,” he said.
Dr Forrest is already a major producer of renewable power in his private capacity through Squadron Energy, which owns numerous Australian wind farms.
The job cuts announced by Fortescue on Wednesday will continue efforts under way for close to 18 months to reduce duplication between the energy and mining divisions.
One layer of duplication will remain: energy boss Mark Hutchinson and mining boss Dino Otranto will continue to be dual chief executives of Fortescue and report into Dr Forrest as executive chairman.
While the top three at Fortescue will remain in place, the rapid turnover of senior executives has continued, with energy executive Eva Hanly and marketing director Vivienne Tieu both leaving the company.
Dual company secretary-general counsel Phil McKeiver has lost the company secretary role, in a move that appears to be driven by his handling of a bitter legal dispute with green iron rival Element Zero.
Private investigators
Fortescue hired private investigators to follow and monitor the former executives behind the Element Zero start-up and their families as part of a lawsuit over an alleged intellectual property breach.
Dr Forrest said on Wednesday that no member of the Fortescue board was aware of the strategy and the board “struggled” to align the actions with Fortescue’s values.
Mr McKeiver had offered his resignation, but it had been rejected, the iron ore billionaire said. “I’m proud of the guy for taking full responsibility.”
Fortescue appointed Mona Gill as company secretary; Mr McKeiver will continue as general counsel.
Iron ore prices are predicted to slide over the next five years as new supply from Africa and Western Australia enters the market, but Dr Forrest said the job cuts were not driven by the direction of iron ore prices.
“We’re going to sadly lose around 4.5 per cent of our direct workforce, 3 per cent of our indirect workforce,” he said of the proposed cuts.
“It’s not a big number in percentage terms, but we still don’t like doing it. But it’s not to jam operating costs down, it is to streamline this organisation and keep the genius of simplicity.”
While the job cuts will affect Fortescue staff around the world, it will add to the thousands of job losses in the Australian resources sector this year at loss-making nickel mines, lithium mines and Alcoa’s Kwinana alumina refinery.
Fortescue appointed Apple Paget as chief financial officer of the combined group on Wednesday, ending the previous structure where the mining and energy divisions had their own CFOs, such as former Reserve Bank deputy Guy Debelle, who lasted just 143 days.
Former Mineral Resources executive Shelley Robertson was announced as Fortescue’s chief operating officer.
Fortescue will continue to push ahead with three clean energy projects that were the subject of final investment decisions last year; a green hydrogen project in Arizona, a green iron project in the Pilbara and a $US150 million green hydrogen project near Gladstone, which will start construction this year.
Fortescue said two further hydrogen projects in Norway and Brazil remained under consideration with the Norwegian project was close to a final investment decision.
‘Real’ zero in 2030
Despite abandoning the 2030 hydrogen goal, Dr Forrest said Fortescue would eventually get to 15 million tonnes of hydrogen production and would retain its promise to have zero greenhouse gas emissions globally by 2030 without relying on carbon offsets. It bills its hydrogen as zero carbon.
Dr Hutchinson said Fortescue would continue to make hydrogen electrolysers at its Gladstone factory at a time when many customers were enduring long waits for electrolysers to be delivered.
But Fortescue’s plan to retrofit Incitec Pivot’s Gibson Island fertiliser plant near Brisbane into a low-carbon version of itself is on the backburner because of high electricity costs in Australia.
Fortescue will also “deprioritise” four hydrogen projects, including one that aimed to build a hydrogen import terminal just 16 kilometres from South Australia’s Whyalla steel mill.
The SA government had overlooked Fortescue when choosing the preferred bidder to build a hydrogen production facility, storage tanks and hydrogen power plant near Whyalla.