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UPDATE 1-Plug Power scraps electrolyser plant partnership with Fortescue

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Plug Power questions plant's economics

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FFI wants to use its own electrolyser technology

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No change to capital cost at $83 million

(Adds FFI chairman and CEO comments)

By Sonali Paul

MELBOURNE, Jan 27 (Reuters) - Plug Power has walked away from building an electrolyser manufacturing plant in Australia with Fortescue Metals Group as the economics did not work, Plug Chief Executive Officer Andrew Marsh said on Thursday.

The project, announced in October 2021, is a key plank in Fortescue's ambition to become a major green energy company through its Fortescue Future Industries (FFI) arm and produce 15 million tonnes a year of green hydrogen by 2030.

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Fortescue had planned to build the world's biggest factory to make electrolysers with Plug Power and began construction in Gladstone in Australia's northeast last February aiming to produce their first electrolyser in 2023.

In a business update on Thursday, Plug Power CEO Marsh said the plant deal with Fortescue was off.

"One, we decided that we didn't want to build a factory with them because we saw the economics, we could do better," Marsh said, according to a transcript of the conference call with analysts.

While Fortescue never announced that the Plug Power partnership had collapsed, on a quarterly call on Friday, FFI CEO Mark Hutchinson confirmed the company would be going ahead with the project using its own technology.

Fortescue will still be spending $83 million on the first phase of the plant, as originally planned, he said.

"We always expected to cover the whole cost," Hutchinson said.

Fortescue wants to use its own electrolyser technology instead of Plug Power's technology, although it will buy electrolysers from the U.S. company for some of its hydrogen projects, Fortescue founder and executive chairman Andrew Forrest said.

"I think Plug Power is very much locked in to certain technology and on a production cycle," Hutchinson told analysts on a quarterly call.

"What we're good at here is building things at scale and exactly what we're going to do on the electrolyser side," he said, adding that it will be built "on time". (Reporting by Sonali Paul; Editing by Diane Craft and Christopher Cushing)