Key Highlights

•  The 20-year agreement with FMG Clean Energy, a unit of Fortescue, was signed on 28 October 2026.

•  FMG Clean Energy is to Supply at least 325 gigawatt-hours a year from 2029, subject to regulatory approvals and construction of the required infrastructure.

•  The announcement did not give the generation mix, capacity in megawatts, Tariff structure or what happens if infrastructure is delayed.

PLS Group (ASX:PLS) has signed a 20-year power purchase agreement with FMG Clean Energy, a unit of Fortescue (ASX:FMG), to supply electricity to its Pilgangoora lithium operation in Western Australia's Pilbara. The agreement was signed on 28 October 2026.

Under the deal, FMG Clean Energy is to supply at least 325 gigawatt-hours (GWh) of electricity a year from 2029. That supply is subject to regulatory approvals and the construction of the required infrastructure.

Powering the P2000 expansion

The agreement is intended to meet rising power Demand at Pilgangoora under the company's P2000 expansion plan. Earlier in October 2026, PLS approved a $1.9 billion expansion of the operation, a decision reported as a bet that growing electric vehicle adoption will support long-term lithium demand despite recent price volatility.

To connect to the new supply, PLS plans to spend about $150 million between 2027 and 2029 on transmission connection and power infrastructure upgrades. Alongside the agreement, PLS revised its Capital Expenditure forecast for the 2027 financial year to between $1.13 billion and $1.20 billion, up from a previous range of $1.11 billion to $1.18 billion.

Expected cost and emissions effects

PLS expects the arrangement to lower unit operating costs at Pilgangoora by about $15 to $20 per tonne under the P2000 plan. Fortescue expects the operation's power-related emissions intensity to fall by up to 80% from 2023 levels by 2030.

Both figures are forecasts. They depend on the infrastructure being built on time, approvals being granted and the expanded operation performing as planned. The announcement did not provide details of the generation mix, the capacity in megawatts, or the tariff structure behind the expected savings.

Why it matters for both companies

For PLS, which describes itself as Australia's largest independent lithium producer, energy is a significant operating input, and a long-term contract may provide more predictable supply as production grows. Lower unit costs could also support margins through periods of weak lithium prices, although the scale of any benefit will depend on market conditions and actual delivery.

For Fortescue, the agreement represents an early commercial step for its energy Business outside its own iron ore operations. Fortescue chief executive Dino Otranto said PLS "is our first customer", adding that there is a strong pipeline of others across the Pilbara.

The agreement is an example of a resource operation in a remote region contracting long-term power from a third-party supplier. For PLS, securing long-term supply is one part of planning for higher output under P2000.

Risks and uncertainties

The agreement does not begin supplying power until 2029, leaving a gap of several years in which construction, approvals and cost risks could arise. The additional $150 million infrastructure spend adds to an already large capital programme, and PLS has also lifted its 2027 capital expenditure range by about $20 million at each end.

Lithium prices have been volatile, and the Economics of the P2000 expansion rely on future demand assumptions that may not be realised. Emissions reductions described by Fortescue are targets rather than achieved outcomes. The announcement did not say what happens if the infrastructure is delayed, or whether early exit provisions apply to the contract.

Background and next steps

Pilgangoora is a hard-rock lithium operation in the Pilbara that produces spodumene concentrate. The P2000 plan is designed to increase output from the site, and power supply is one of several workstreams needed to deliver it.

Over the next three years, PLS is expected to progress the transmission connection and power upgrades while FMG Clean Energy develops the supply infrastructure. Further detail on regulatory approvals, construction milestones and how the agreement fits within PLS's broader expansion timetable is likely to emerge in future updates from either company.