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Exxaro partnering Enertrag to support just energy transition

Exxaro's results covered by Mining Weekly's Martin Creamer. Video: Nicholas Boyd,

18th August 2022

By: Martin Creamer

Creamer Media Editor

     

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JOHANNESBURG (miningweekly.com) – Coal and renewable energy company Exxaro has built a renewable energy business that is said to be well positioned to contribute significantly to addressing South Africa's electricity deficit.

Emphasised by the JSE-listed company is that South Africa's economic growth and social progress depends on energy security, which it is setting out to help to provide. (Also watch attached Creamer Media video.)

“We have installed 229 MW of wind energy, which is a strong base from which we will build and grow this business,” new Exxaro CEO Dr Nombasa Tsengwa said after the company presented 147%-higher group earnings before interest, taxes, depreciation and amortisation (Ebitda) of R10 603-million on mainly the 142% increase in coal Ebitda in the six month to June 30.

Cash flow from operations increased 137% to R9 433-million and, together with the dividends received from its equity-accounted investments of R3 030-million, was sufficient to fund capital expenditure and dividends paid.

An average equipment plant availability of 97.4% allowed Exxaro’s wholly owned renewable energy company Cennergi to generate 307 GWh of electricity at an Ebitda margin of a whopping 80%.

In Exxaro’s endeavour to green its energy business, Cennergi has concluded a joint development agreement with Enertrag South Africa to collaborate on the development and execution of renewable energy products for the Mpumalanga region, on an exclusive basis.

Enertrag South Africa is a subsidiary of Enertrag SE, the German-based renewable energy company founded in 1992 by owner, Jörg Müller, who conceptualised his first wind farm in 1989, constructed it in 1993 and which is still operating in Germany’s Uckermark region, the company’s website states.

Both Cennergi and Enertrag will contribute skills and project pipelines in realising our joint ambitions, which will accelerate renewable solutions for our mines and beyond.

Furthermore, both companies also have strong presence within the region and therefore this partnership helps to support the company’s just energy transition strategy, Tsengwa told the presentation covered by Mining Weekly.

REPRIORITISED IMMEDIATE INVESTMENT IN SOUTH AFRICA

Although Exxaro communicated a 3 GW growth target by 2030, with the rapid and positive local policy developments in this sector, it has repaced its growth to 1.6 GW by 2030 and reprioritised immediate investment and development in South Africa.

“Overall, it’s really imperative to be agile whenever market opportunities change, looking at how you really want to optimise the balance sheet to service the needs of the business.

“There are going to be opportunities that come up that are going to challenge our repacing of our energy strategy, and those opportunities will be looked at very carefully. But there will also be opportunities that arise, because of market conditions, that call on us to repace, and that’s the agility we are talking about.

“We believe that this approach is responsible and its value goes beyond just returns but also to look at the direct impact to the people of South Africa and our economy,” Tsengwa emphasised.

As the energy transition continues to guide the pace, Exxaro’s ability to supply key minerals to support clean energy technologies has become much more urgent.

A common theme in copper, bauxite and manganese, its three chosen minerals, is the expectation of insufficient supply in the long term, relative to demand.

The Russia/Ukraine war has heightened global geopolitical tensions resulting in increasing political instability and a higher inflation environment.

Higher borrowing costs and political instability brought about by inflation, threaten to further widen the supply deficit of these critical minerals by delaying investments necessary for the growth of additional supply.

“The bottom line is that the world needs significant investments to be made in these minerals to support the much-needed energy transition, and failure to make investments today in preparation for the expected growth in demand for these minerals, will threaten that long-term energy security,” said Tsengwa.

SHORT TERM

The current manganese and bauxite pricing environment is supportive of entry through acquisitions.

“Merger and acquisition (M&A) activity in bauxite and manganese have been relatively muted in comparison with copper.

“In terms of the copper market, we’ve made a determination and continue to look at those M&As.

“Despite the short-term market dynamics, the long-term fundamentals of copper, bauxite and manganese remain attractive and we are focused on pursuing acquisitions within these minerals but always taking cognisance of our investment criteria, and balancing it with capital allocation requirements to balance risk,” Tsengwa explained.

Edited by Creamer Media Reporter

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