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Exxaro renewables business up in half-year coal earnings downer

Exxaro's Cennergi wind turbine.

Exxaro's Cennergi wind turbine.

17th August 2023

By: Martin Creamer

Creamer Media Editor

     

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JOHANNESBURG (miningweekly.com) – The half-year revenue contribution from the energy business of Exxaro Resources was 17% higher than in the first half of last year, with energy generation from the Cennergi wind assets driven up by an improvement in wind conditions from the prior year.

Overall, the JSE-listed black empowered diversified resources and renewable energy group reported a 28% decrease in earnings before interest, taxes, depreciation and amortisation (Ebitda) to R7 661-million.

Cennergi’s operational Ebitda margin on the operating wind assets was again a high 80%, underpinned by the long-term offtake agreements with Eskom.

“Notwithstanding the many obstacles we have continued to face during the first half of 2023, including the ongoing logistical challenges which have been compounded by the steep decline in thermal coal prices, Exxaro has once again displayed its resilience and agility in navigating through the challenging business environment in which we operate,” Exxaro CEO Dr Nombasa Tsengwa stated in a release to Mining Weekly

The large South Africa-based group, with interests in the coal, energy and ferrous markets released its reviewed interim results for the six months to June 30.

The operating wind assets generated a 5%-higher-than-guidance 335 GWh of electricity despite the 15 GWh generation loss at one of the wind facilities owing to an Eskom distribution line fault that occurred earlier in the year.

The Cennergi project financing of R4 460-million, which will be settled in 2031, has no recourse to the Exxaro balance sheet and is hedged through interest rate swaps at an effective rate of 12.7%. 

The total R1 561-million investment for the 68 MW Lephalale solar photovoltaic project at the Grootegeluk mine, in Limpopo, which reached financial close on June 29, will be funded through limited recourse project finance debt by South African lenders at a gearing ratio of 75%. Construction will commence during this half and commercial operation is expected in 2025.

Cash flow generated by operations fell 34% to R6 252-million and, together with the dividends received from equity-accounted investments of R1 794-million, were sufficient to fund capital expenditure (capex) and ordinary dividends paid.

Total capex increased to R801-million, made up of R788-million sustaining capex and R13-million expansion capex. Cash generation resulted in a net cash position of R11 588-million (excluding Cennergi’s net debt of R4 363-million), up from the net cash position of R9 653-million at the end of December.

Exxaro reported the domestic coal market as remaining stable, despite a depressed export pricing environment. The decline in export prices, however, impacted on the economics of exporting through alternative ports. Demand for low calorific value coal remained resilient as domestic end-users continued to offtake power station coal from various Exxaro mines.

Lacklustre rail performance owing to locomotive availability, cable theft, derailments and vandalism remained. The collaboration by the Transnet Freight Rail-Industry Recovery Team realised some benefits and service levels did not deteriorate further. Exxaro railed 2.45-million tonnes of export coal to Richards Bay Coal Terminal (RBCT), marginally down on the 2.54-million tonnes for the same period last year. The poor rail performance also negatively impacted ArcelorMittal South Africa’s offtake.

The average benchmark API4 RBCT export price of $130/t was 53% lower, resulting in a 52% decrease in the average realised export price for Exxaro of $127/t. Despite this price decline, Exxaro was able to realise 98% of the average API index price based on its sales mix.

“We’re extremely proud of the results we’ve delivered this half in a challenging macroeconomic climate. As we look ahead, we do so with pride knowing that our strength lies in the women and men who, year-in and year-out, work tirelessly to contribute to the value of the business – I’d like to thank each and every one of them for their continued dedication and resilience,” said Tsengwa

Edited by Creamer Media Reporter

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