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Feb 23, 2012

Coal miner Exxaro to submit five renewable energy bids

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Exxaro CEO Sipho Nkosi speaks to Mining Weekly Online about the company's intention of entering the energy sector. Camerawork: Nicholas Boyd. Editing: Darlene Creamer.
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JOHANNESBURG (miningweekly.com) – South Africa’s second-largest coal miner Exxaro Resources is moving ahead with plans to generate clean energy, CEO Sipho Nkosi said on Thursday.

Exxaro, which established a joint venture (JV) called Cennergi with an undisclosed third party, is planning five renewable energy projects – two solar and three wind.

The JV would submit tenders under the Department of Energy’s (DoE’s) ‘request for qualification and proposals for new generation capacity’ in the second bidding window, which closes on March 5.

In total, the DoE was seeking to procure 3 725 MW of renewable energy capacity from independent power producers (IPPs) between 2012 and 2016. The first bidding window closed in November last year.

Meanwhile, Exxaro continued to explore opportunities in the energy markets with a focus on cleaner energy initiatives. Nkosi stated that it was good for South Africa to have the right mix of energy sources.

Exxaro, which is South Africa’s second-largest coal producer, also reported that a prefeasibility study for the development of a 600 MW to 1 200 MW coal-fired base-load power station in the Waterberg, in Limpopo, was under way.

The company selected four base-load IPPs and would announce the preferred bidder in the first half of 2012. Further, nonbinding term sheets for the off-take of 1 150 MW of electricity have been signed between Exxaro and industrial off-takers.

Construction of a 14 MW cogeneraion plant at the miner’s Namakwa Sands project, in the Northern Cape, was expected to start in the second quarter of 2012 and a prefeasibility study for a 60 MW cogeneration plant at its Grootegeluk mine was expected to be complete in the first half of the year.

Further, the first half of 2012 would see a clearer indication of the potential of the evaluation of underground coal gasification opportunities on Exxaro’s coal tenements in South Africa and Botswana.

COAL GROWTH

Meanwhile, Exxaro would continue to grow its coal division as the country has an abundance of coal reserves, which were cheap to mine, said Nkosi.

The Grootegeluk mine expansion project, in Limpopo, which would supply State-owned power utility Eskom with 16.4-million tons a year of coal for the Medupi power station, progressed within its R9.5-billion budget. The mine expansion is 72% complete and would deliver first coal in May 2012.

First coal production at the proposed greenfield Thambametsi development project, adjacent to Grootegeluk, was expected during 2016/17. The project would supply coal to a base-load IPP.

Further, the bankable feasibility study of Exxaro’s Belfast project was expected to be complete by the second half of 2012. Start-up and first production was expected in 2014.

Nkosi pointed out that its coal business would continue to seek alternatives to export the company’s increased coal volumes, however, continued good performance from Transnet Freight Rail (TFR) was expected.

He welcomed Transnet’s infrastructure initiatives, as increased ports and rail capacity would enable the coal industry to increase production and meet the export demand.

Transnet is embarking on a R300-billion, seven-year investment programme to expand South Africa’s ports, railways and pipelines.

This would enable Exxaro to build and strengthen its coal export leg and feed into the unlocked capacity, Nkosi stated.

Exxaro’s coal division reported a 24% increase in net operating profit to R3.4-billion, up from R2.6-billion in the year ended December 2010, as well as a coal revenue increase of 21%, reaching R12.7-billion in the 2011 financial year, from R10.5-billion in the comparative period last year. This was attributed mostly to higher selling prices and stronger international demand.

The diversified miner increased its export volumes by 20% to 4.9-million tons, boosted by better performance from TFR.

However, its power station sales fell 11%, owing to a 24% drop in coal production at Eskom-tied operations on the back of adverse geological conditions, the closure of the Mooifontein opencast operation at the Arnot mine, as well as the flooding in Mine 2 at Matla.

Domestic non-Eskom sales fell 9%, mainly because of production challenges at its NBC mine.

Coking coal output declined 11%, because of lower demand from Arcelor Mittal South Africa, which was partially offset by higher output at the Tshikondeni mine.

Edited by: Mariaan Webb
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