Twiggy’s great green energy quest
The mining magnate has landed back in
Australia after leading his Fortescue Metals Group on an audacious mission
motivated by his faith in green hydrogen as a replacement for fossil fuels.
Andrew and Nicola Forrest with Democratic Republic of the Congo President Félix Tshisekedi and first lady
Denise Tshisekedi.
Andrew Forrest has spent the past three months living out of a
suitcase, travelling from African outposts to Berlin, Paris and St Petersburg
on his great green energy quest.
The
country’s richest man is back in Australia. He’s looking to turn his attention
to large-scale solar and wind energy projects at home after staking a big claim on hydropower in Africa and talking with Russia
about similar projects.
All up, Forrest has spent eight months of this financial year on
the road while his Fortescue Metals Group has blasted away at iron ore mines in
Western Australia’s Pilbara and shipped the steel-making ingredient to China at
record prices. “We’ve been existing on three or four hours of sleep. It has
been a really tough trip,” he told AFR
Weekend.
Forrest
and wife Nicola were in Goma in the Democratic Republic of the Congo last
weekend, with the city still recovering from the shock of a deadly volcanic
eruption. He stood on the shores of Lake Kivu – where scientists were warning
magna flows could unleash a lethal cloud of gas – with DRC president Felix
Tshisekedi and signed up Fortescue for its greatest challenge.
The
deal includes some wiggle room for both parties but gives Fortescue subsidiary
Fortescue Future Industries the inside running on developing Grand Inga, the
world’s biggest hydropower project which involves damming part of the mighty
Congo River.
There’s
a massive question mark over whether it can be done after decades of hype and
false starts. One of those involved in the false starts was BHP, which looked
at a smaller incarnation of the project known as Inga 3.
A
big problem holding back Inga projects over the years is that the power
generation involved is too much for African markets to handle.
The
BHP proposal for Inga 3 included an anchor user in the form of a 2000-megawatt
aluminium smelter near the hydropower plant. The mining giant pulled out of any
deal with the DRC in 2012 and the World Bank followed in 2016.
Forrest
famously made his iron ore billions by picking up mining tenements in the
Pilbara that had been dropped or unwanted by the likes of BHP and Rio Tinto.
Fortescue then had the example of
its bigger rivals to follow when it came to developing mines and export
infrastructure. But there are no maps for where Forrest is taking the company
now.
Apart
from the challenges in the Congo, Fortescue has had teams in Russia looking at
hydropower projects in that country’s far east.
Show
of solidarity
Forrest
is looking to blaze a global trail in large-scale green energy, green hydrogen
and green ammonia production, and trying to find customers in a nascent market
while relying on technology to catch up.
To
achieve his vision of making Fortescue a global energy player to rival the oil
and gas super majors, he only needs the world to get on board.
Since
leaving Perth in April, he’s visited Japan, South Korea, Indonesia, the United
States, Denmark, Germany, Netherlands, France, Jordan, Russia, Kenya, Djibouti,
DRC, Cameroon and Namibia.
The
previous five-month trip took Forrest and his Fortescue team to 47 countries.
He narrowly avoided being caught up in a deadly terrorist attack in Kabul and
had to postpone a planned trip to Kyrgyzstan after catching COVID-19 from a
Russian translator and being airlifted to a Swiss clinic.
But
Forrest may have dodged a bullet by catching the virus because the presidential
palace where he would have been staying in Kyrgyzstan was attacked and set on
fire by protesters following disputed election results.
Why
go to high-risk places such as Goma, Kabul and Kyrgyzstan in the middle of a
global pandemic when you’re a family man with a near $30 billion fortune and a
capable team of executives behind you?
“You
go to places where the president knows that you don’t have to be there and you
are going there to show solidarity with the country,” Forrest says. “It is
depth of relationship with the administration of countries based on mutual
trust.
“In every country where Fortescue has secured development
rights, it has an agreement with the sovereign leader that should it encounter
corruption in any form it will inform the leadership of that country, including
the president, who will announce that.
“And
therefore everyone knows from the outset that the entire bidding and
construction process will be totally transparent and void of corruption.”
Deals
in DRC, Kenya, Ethiopia
Forrest
was on his second visit to the DRC when he signed the Grand Inga deal. He
hasn’t gone back to some of the developing nations he visited on the first
stage of his green energy quest because they wouldn’t agree to conditions on
improving human rights, eliminating modern slavery and ending forced marriage.
Achieving
those admirable goals on top of massive investment deals won’t be easy in
Africa, a continent with a reputation for political instability and governance
issues.
The
DRC is one of the most challenging of African nations to do business with. The
last election in 2018 was the first peaceful transfer of power in the country’s
history, though even that faced credible claims of being a stitch-up.
Forrest
says he has done deals for Fortescue on green energy and green hydrogen
projects in the DRC, Kenya and Ethiopia, with investors and financiers already
indicating a willingness to commit more than $US100 billion ($132 billion).
Grand
Inga alone carries a $US80 billion price tag and the development plan Fortescue
will lead includes associated port, green hydrogen and green ammonia
capability. A lot of the investment dollars would come from Europe, where
Forrest says there are customers eager to get their hands on green hydrogen.
Former investment banker and major infrastructure project overseer
Philippe Benoit has intimate knowledge of Grand Inga, a project hailed as being
able to produce 42,000 megawatts of electricity based on expansion of the existing
351-megawatt Inga 1 and 1424-megawatt Inga 2 plants.
‘Environmental
and social risks’
Benoit
was the World Bank man in the DRC for four years and facilitated the last major
investment in an Inga project. He says the addition of transportable green hydrogen
capability would overcome what has been one of the great stumbling blocks to
developing Grand Inga – massive power generation way beyond regional demand.
In the past, it was
envisaged that a large transmission network stretching across multiple borders
would be needed to justify the investment. However, there was little appetite
for such a plan given credit question marks over the potential markets.
If technology allows
green hydrogen to be produced and transported at scale, getting it out of
Africa to the world shouldn’t be a huge stretch. Benoit points out that Inga is
close to the coast and that the region is not unfamiliar with big industrial
centres used to export fuel.
Just up the coast in the
Republic of the Congo, French oil and gas major Total – which aims to get to
net zero emissions by 2050 – has a major processing and export hub.
Benoit says that, while
the addition of green hydrogen reduces the market risk that has always
surrounded Grand Inga, it still comes with huge environmental and social risk.
The Great Inga plans involve building a much bigger dam than with Inga 1 and 2,
and flooding a valley. It’s estimated 25,000 people could be displaced.
Projects like these have
a troubled past. China displaced millions of people to build the Three Gorges
dam and hydropower project for less than half the megawatts promised by Grand
Inga.
“The environmental and
social impact are problematic and this is where weakness in DRC governance
systems tends to exacerbate the problems,” Benoit says.
“Do you have comfort in solid safeguards to make sure whatever
number of people need to be displaced or are otherwise adversely affected are
compensated?”
Benoit
welcomed the Forrest pledge that any foreign entity or company that worked with
Fortescue in Africa would have to commit to training local workers so that they
build the infrastructure and power projects.
However, Benoit thinks that is just the start and more will need
to be done to ensure economic benefits flow across a broad base of the DRC
population and many more homes get access to electricity.
“This
is the jewel of the DRC and much of Africa,” he says. “There are extremely poor
people and how you treat those people will be very relevant to people’s
willingness on the investor side to back the project.”
There’s
no doubt Forrest will have been talking to potential investors and financiers
about the environmental and social issues as well as the imperative to step up
the fight against climate change.
“Fortescue
has secured the prime hydro sites across Africa to develop in excess of 100
gigawatts of power for green hydrogen product,” he says. “We have firm interest
for at least that amount in Europe and we are continuing to build relationships
across Africa, Latin America, Europe and Asia.
“We are speaking to off-takers, governments and energy source
nations as we stitch together a global green hydrogen supply chain.”
On
the first trip, the Fortescue travelling party split into multiple teams to
carry out the work, setting up bases in Croatia and the Turks and Caicos
Islands, north-east of Cuba, to regroup. On the latest tour, they stayed on the
road “going in and out of various stages of exhaustion”.
Forrest’s
private jet travel included a whirlwind of meetings with business leaders and
heads of state. He gave high-profile media interviews promoting green hydrogen
as a silver-bullet solution to climate change and railed against fossil fuels
and promoters of blue and grey hydrogen as part of the energy transition.
Germany
and Russia responsive
The
Fortescue founder and chairman made only two big announcements – the one in
Goma on Grand Inga and one in Berlin where he outlined the Fortescue strategy.
“Berlin leads Germany and Germany leads Europe in the fight against climate
change,” he says.
Forrest
told German publication Handelsblatt that
Fortescue wanted to be supplying at least 1.5 million tonnes of green hydrogen
a year by 2030 and to begin production next year.
His
comments are being taken very seriously in Germany. Federation of German
Industries deputy director general Holger Losch told Handelsblatt that Forrest
had a “cool strategic view of what the world will need in the future: gigantic
quantities of hydrogen”.
Losch
and Forrest know one another through Hysupply, a project jointly funded by
Australia and Germany to explore a potential hydrogen partnership between the
two countries.
Forrest
also attended the St Petersburg Economic Forum and held high-level talks with
the Russian leadership about projects there. Russia’s ambassador to Australia,
Alexey Pavlovsky, says Forrest is interested in hydropower projects on river
systems in Russia’s far east.
“He
came to the Russian Federation with ideas in the area of developing green
hydrogen. And these ideas are of interest to the Russian government, and to the
Russian companies, and now we are in the process of how it can be done,” he
says.
Speaking
on the sidelines of the Australian Petroleum
Production & Exploration Association conference in Perth,
Pavlovsky confirmed meetings between Forrest and Russian ministers and state
corporations.
“We’ve
got a lot of renewable resources, in fact 45 per cent of our energy generation
is produced from renewables by now, so it’s a huge potential and it could be
used to produce hydrogen, both as a raw material and an energy source,”
Pavlovsky says.
“As
far as I know, he was targeting obviously hydro energy – we have powerful
rivers. As far as I know he has been targeting, and his team is looking at,
some regions in the far east of Russia, which is also good from the point of
view that we always highlight the far east of Russia as the area of preference
for co-operation with Australia.“
Brad Thompson & Financial Review
Reporter
- with the contribution of Ishiaba Kasonga
