Andrew Forrest Stakes His Legacy on Hydrogen: The Fuel of the Future?

In today’s Money Morning…the hydrogen solution…the investor playbook…and much more…

Andrew Forrest has always struck me as a sort of awkward business leader.

Don’t get me wrong; he’s very good at running his empire, having turned Fortescue Metals Group Ltd [ASX:FMG] into a mining juggernaut. And now turning his attention to other industries and fields.

But, on the other hand, he seems desperate to become a celebrity CEO. Akin to the likes of Henry Ford, Bill Gates, or more recently, Elon Musk.

Because no matter what you may think of these CEOs, you’re bound to have heard of them.

Forrest though isn’t quite on the same level as these names, yet.

Sure, most Australians probably have heard of him, but that’s about it. He hasn’t quite stamped his authority as an undisputable figurehead in my mind.

Granted, maybe he doesn’t even want this celebrity status. I’m not going to pretend I know the man’s inner machinations. But, given the amount of time he spends talking to, writing in, or engaging with the press, he certainly doesn’t avoid attention.

In fact, as of this morning, Andrew Forrest has laid bare his latest plan to ‘save our economy and our planet’ at the same time. A bold claim to make for sure, but one that could cement Andrew Forrest’s legacy as an Australian icon.

At least, that’s the impression that I believe he’s hoping for…

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The hydrogen solution

Both the ABC and AFR had featured pieces on Forrest’s new agenda this morning. With the mining magnate suggesting that hydrogen could be the solution to some of our biggest problems.

As he comments: Our fossil fuel industry — particularly coal — is seemingly reaching its end. With many jobs already lost as several major power plants have closed in recent years. A strain that is typical of any major industrial transition.

Forrest though, believes that hydrogen could save them. All while staying on track for our green energy future.

As Forrest notes in the ABC:

‘We’re missing a colossal opportunity. The tricky part is transporting it, but we are cracking that.

‘The green hydrogen market could generate revenues, at the very least, of $US12 trillion by 2050 — bigger than any industry we have now.

‘And Australia, with characteristic luck, is sitting on everything it needs to be the world leader, but only if it acts fast.’

He certainly seems to think that hydrogen is the fuel of the future. A prediction that I have few qualms with.

I think it would be folly to ignore the importance that hydrogen could, and likely will, play a role in the years to come. Whether it will be the sole (or even primary) source of our cleaner, greener energy future though, is a little less certain.

In the short term though, Forrest already has big ideas on how Australia can capitalise on this hydrogen boom. With Fortescue obviously featuring heavily…

From the AFR:

‘Dr Forrest said Fortescue, which ships almost all its iron ore to customers in China, would start building Australia’s first “green steel” pilot plant this year and a commercial-scale plant within the next few years.

‘He said capturing even 10 per cent of the world’s steel market could create more than 40,000 jobs in Australia, and that was more than enough to replace those set to be lost with the demise of the coal industry.’

Say what you want about the man, but at least Forrest is putting his money where his mouth is.

The investor playbook

For these reasons and more, I think it will be fascinating to watch how Forrest progresses with his hydrogen agenda.

Would I, as an investor, pledge my capital to it though?

Probably not.

I certainly think his hydrogen steel plant is an interesting proposal. But it certainly isn’t a new idea. Even Forrest himself admits that, again from the AFR:

‘Dr Forrest said it was no longer a pipedream, because enterprising businesses around the world, such as Thyssenkrupp in Germany and Japan’s Nippon Steel, were already figuring out the technology.’

In other words, he’s already behind the pack. With these other steel producers already well on their way to pioneering the hydrogen future.

Granted, that doesn’t mean Forrest or Fortescue can’t compete. It just may take them a little longer to catch up. And as an investor, I think if you’re going to invest in hydrogen, you should do so at the cutting-edge.

The bad news is that that isn’t exactly easy if you’re looking purely at the ASX. With, by my count, just one pure hydrogen play currently listed: Hazer Group Ltd [ASX:HZR]. A far more exciting prospect that is developing a method to turn natural gas into hydrogen.

A far more ambitious, but also far smaller, company.

The good news though, is that the hydrogen sector is gaining traction on the ASX. With a few other stocks, mainly on the small side, also starting to pivot to this green energy solution. Leigh Creek Energy Ltd [ASX:LCK] and Real Energy Corp Ltd [ASX:RLE] are two noteworthy examples.

Not to mention the fact that Infinite Blue Energy is looking to IPO sometime before March. A company that is aiming to become the first green hydrogen producer in the country. Beating Forrest to the punch, with plans for facilities in both WA and NSW.

Plus, we may see even more new players in the months and years to come. Especially if Forrest’s plans capture the attention of other motivated individuals.

Right now though, while I applaud the direction he is heading, I think Forrest is still not ahead of the game. And although I agree that hydrogen is likely to become a huge industry in the years to come, I think investors would be better off putting their capital into other projects.

Either way though, expect more big developments for the energy sector.

A huge trend that no one can afford to pass up. Not even Andrew Forrest.

Regards,

Ryan Clarkson-Ledward,
Editor, Money Morning

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