Friday, March 17th, 2023
Financial close is expected at the end of this month for construction in the second quarter of this year of a 68 MW solar power plant at a cost of between R1.52-billion and R1.56-billion, Exxaro CEO Dr Nombasa Tsengwa said during a record-earnings presentation by the coal, energy and ferrous markets company.
Lephalale is a coal mining town in the Limpopo province, immediately east of the Waterberg coalfield and South Africa’s other coal province of Mpumalanga is also in the JSE-listed company’s renewable energy sites.
“We are now focusing our attention on commercial and technical workstreams,” Tsengwa said following the reporting of 41% higher revenue at R46.4-billion, which was the main driver of the 78% increase in earnings before interest, taxes, depreciation and amortisation (Ebitda) to R19 002-million in the 12 months to December 31.
The partnership with Enertrag has a potential pipeline of 700 MW. Furthermore, we are in discussions with various parties to acquire near-permitted sites to further boost our entry into the energy market.
The potential pipeline ranges from 370 MW to 975 MW.
“Closing the electricity gap requires concerted efforts from citizens at large but also more from the likes of our business to make meaningful investments,” said Tsengwa, who reported that the Ebitda margin of Cennergi was a high 80% in 2022, underpinned by the long-term offtake agreements. As Exxaro’s wholly owned energy arm, Cennergi last year generated 671 GWh of electricity.
Tsengwa revealed that, in the past 12 months, Exxaro has pursued eight wind and solar acquisitive growth opportunities, one of which was taken through the company’s formal processes but went no further for strategic reasons and very tight timelines.
Six opportunities were abandoned for not meeting Exxaro’s investment criteria, and one is still subject to a due diligence process review.
OPERATING IN SOUTH AFRICA
Worsening logistics constraints and rising electricity supply shortage have introduced new challenges to Exxaro, in a South Africa that Tsengwa said has become a difficult place in which to do business.
The increasingly difficult South African environment, she said, had demanded significant structural adjustments, which is compelling business to grow new skills of either being self-sufficient or relying on alternative means of doing business.
“This is all outside of the norm of how we used to do business in the country,” said Tsengwa.
Losses of volume were continuing to be faced owing to the loss of rail capacity.
“As a responsible corporate citizen, we recognise the detrimental impact of the increasing number of trucks on the road, the damage that does to infrastructure and the social impact of that infrastructure damage to the communities around them,” said Tsengwa.
“The worsening electricity supply shortage is compounding negative impact on business and particularly the small, medium-sized and microenterprises, as well as other faces of our society.
“A direct impact is firstly through small enterprises in our supply chain that are supported through our enterprise supply development programme. These small businesses are experiencing difficulties in deploying their services and fulfilling their financial obligation,” she added.
Moreover, the welfare and morale of Exxaro employees and their families has been severely affected.
“This is an unfortunate and evolving situation for all of us in South Africa. Due to this complexity, we do not by any means believe that solutions will be simple. However, it is quite encouraging for us to witness some of the actions that the government and the State-owned enterprises have taken.
“Transnet’s decision, for instance, to concession the Johannesburg to Durban freight line and National Treasury’s requirement for Eskom to do the same with some of its power stations. We really expect to see a little bit more as well from our government in this line of commitment,” said Tsengwa.