Analysts expect Fortescue Metals Group dividend pay-outs to take a hit under plans to spend $US6.2 billion on turning iron ore mining operations green.
Analysts and investors have rounded on Andrew Forrest and his Fortescue Metals Group over plans to spend $US6.2 billion as part of aThere are concerns the renewables spending spree will force Fortescue to cut back on shareholder returns as Dr Forrest takes a zealous approach to achieving net-zero greenhouse gas emissions.
Morgans is critical of Fortescue’s trailblazing approach to decarbonisation, saying “the need for world-leading energy and technological innovation sits at odds with Fortescue’s core competencies in bulk mining” and is likely to lead to inefficient use of capital. Fortescue said this would lead to net operating cost savings of $US818 million a year from 2030 as it shed fossil fuel-related expenses and carbon credit purchases in favour of wind and solar to hit “real zero” emissions.
The Fortescue executive chairman and founder used the event to call out Elon Musk over the electric car maker’s scepticism about hydrogen fuel cells.Dr Forrest, a big backer of green hydrogen through FFI, questioned the Tesla founder’s motives in talking down the flammable gas as an energy storage option.
Morgans said it seemed certain Fortescue would generate materially lower free cash flow over the next decade compared to the past 10 years and warned the company would become evenFortescue’s dividend policy is to pay out 50-80 per cent of full-year net profit, with the payout ratio sitting at about 75 per cent for the past five years.