Key Highlights

  • The 20-year power purchase agreement with a Fortescue subsidiary covers a committed minimum of 325 GWh of electricity per annum.
  • Unit operating costs (FOB) for the P2000 case are expected to fall by approximately $15-20/t against the 10-year average announced on 16 October 2026.
  • Transmission connection and power infrastructure works are estimated at about $150M, phased at $20M in FY27, $85M in FY28 and $45M in FY29.
  • Power-related emissions intensity is forecast to fall by up to about 80%, from 0.69 to about 0.13 tCO2-e/MWh, within the original FY30 timeframe.

PLS Group Limited (ASX:PLS) has signed a 20-year power purchase agreement through its subsidiary Pilgangoora Operations Pty Ltd with FMG Clean Energy Pty Ltd, a wholly owned subsidiary of Fortescue Ltd (ASX:FMG). The contract provides a committed minimum of 325 GWh of electricity a year to the Pilgangoora Operation, where power demand is forecast to rise under the P2000 operating model. PLS becomes the first external customer of Fortescue's Green Grid.

Terms of the Fortescue Agreement

Supply is targeted to begin in calendar year 2029, subject to detailed design, regulatory approvals, construction of the transmission and connection infrastructure, and commissioning. The agreement is also subject to conditions precedent, including a related construction agreement between PLS and Fortescue being executed and becoming unconditional.

The connection will link Pilgangoora to Fortescue's Turner River solar farm and 220kV substation through a new transmission line of about 25km. PLS will fund and own roughly 20km of that line, which follows the existing mine access road to a new 220/33kV receiving substation at the site. On-site powerlines will be upgraded to 33kV to supply the main Pilgangoora facilities, and the connection is sized above 100 MW, which exceeds P2000 requirements. PLS said the extra capacity could accommodate underground mining and fleet electrification without further transmission works.

Power will come from a mix of the Fortescue Green Grid and Pilgangoora's existing generation, which combines LNG-fuelled gas engines, solar and diesel across the Pilgan and Ngungaju power stations, along with battery energy storage systems. Supply under the agreement is not firm, and PLS will expand its on-site generation to manage any interruption.

Cost and Capital Effects

The P2000 Feasibility Study and the P2000 FID announced on 16 October 2026 were based on an expansion of the existing on-site power solution. With the Fortescue agreement taken into account, the previously quoted P2000 unit operating costs (FOB) are expected to be lower by approximately $15-20/t.

Capital expenditure for the connection and upgrades is estimated at approximately $150M over three years, with spending of about $20M in FY27, $85M in FY28 and $45M in FY29. The amount will be included within the existing Enhancing Infrastructure capital guidance. PLS stated that the lower power cost and the reduction in emissions intensity are expected to outweigh the capital outlay over the term of the agreement.

Managing Director and CEO Dale Henderson said the arrangement reinforces the company's low-cost position at Pilgangoora and improves the economics of the P2000 expansion beyond those announced at the decision point. Fortescue CEO Dino Otranto described the contract as the first step in supplying external customers from the Green Grid and a new long-term revenue stream for his company.

Updated Power Strategy and Emissions Path

PLS completed a review of the Pilgangoora Power Strategy, weighing market conditions, regional renewable generation and transmission availability, technology and capital costs, and future power needs. The review reaffirmed the Stage 3 emissions intensity set out in the 2023 Power Strategy but removed the interim Stage 2 pathway and the on-site solar spending that came with it.

The strategy is forecast to reduce power-related emissions intensity by up to about 80%, from the FY23 baseline of 0.69 tCO2-e/MWh to about 0.13 tCO2-e/MWh, within the original FY30 timeframe. The figures cover total site consumption, including camp facilities, and assume Fortescue's Green Grid is built as modelled. Stage 1 has already been delivered, with new gas-fired generation, LNG storage and battery storage producing about a 20% reduction in FY25 against the baseline.

Where the Agreement Leaves Pilgangoora

The contract ties Pilgangoora's electricity supply to a Fortescue network for 20 years, with a minimum of 325 GWh a year, a roughly $150M connection program and a unit cost reduction of $15-20/t against the P2000 case. It also aligns with PLS's ambition of net zero Scope 1 and Scope 2 emissions in the decade commencing 2040.