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Exxaro well-advanced on own-mine renewables plan, says new energy MD

Exxaro's MD for Energy Leon Groenewald.

Exxaro's MD for Energy Leon Groenewald.

17th March 2023

By: Martin Creamer

Creamer Media Editor

     

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JOHANNESBURG (miningweekly.com) – Coal miner Exxaro has advanced considerably on progressing the generation of renewables to supply electricity to its own mining operations, newly appointed Exxaro MD for energy Leon Groenewald said in response to Mining Weekly during Thursday’s media conference at which the JSE-listed coal, energy and ferrous markets company reported record earnings before taxes, interest, depreciation and amortisation (Ebitda) of R19 002-million in the 12 months to December 31.

Groenewald said financial close on the large-scale solar facility at Lephalale, which is being reported in alternating current (AC) rather than direct current (DC) terms, is expected in the next couple of weeks.

Amid many in the country wanting to indicate installed power of their renewable power facilities on a DC basis, he said that Exxaro had opted to disclose the 68 MW of the Lephalale facility on an AC basis.

Exxaro CEO Dr Nombasa Tsengwa revealed during Thursday’s reporting that the Lephalale solar facility would be built at a cost of between R1.52-billion and R1.56-billion.

“From a perspective of funding, we did it very similarly to what you would find in the Renewable Energy Independent Power Producer Programme, so you will be looking at gearing levels of between 75% and 80%.

“Basically, an engineering, procurement and construction (EPC) and all of those agreements are done, so we’re looking to start construction in quarter two for generation in 2024,” Groenewald told Mining Weekly.

“There is certainly a reduction in terms of Scope 2 emissions and there’s also a saving in terms of electricity charges and that also is a significant kicker in terms of the equity internal rate of return (IRR) for the group,” added Groenewald.

He explained that a solar plant generates power on a DC basis and to make this power useable for industry and other users, DC power needs to be converted by inverters to AC power, with the AC power number being lower than the DC power number.

For example, if installed capacity on a DC basis is, say, 100 MW, when converted to AC basis with inverters, the usable plant capacity is, say, 85 MW.

Plants and industry use AC power and transmission lines to transmit AC power.

From an independent power producer (IPP) perspective, some IPPs use the 100 MW DC to indicate the installed capacity, a higher number.

“We chose to show the AC number as it indicates the usable capacity for the end-user,” Groenewald explained to Mining Weekly.

Meanwhile, Exxaro’s partnership with independent energy company Enertrag aims to also develop wind and solar solutions for the mining industry in Mpumalanga, with the first preferred site in that coal-renowned province already permitted.

“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% Ebitda surge.

The partnership with Enertrag has a potential pipeline of 700 MW. Furthermore, Exxaro is in discussion 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.

“We are quite mindful of South Africa’s electricity grid constraints, which really remain a challenge in our energy strategy, and a challenge for others in the country as well.

“There are around 9 GW of renewable energy projects under development in South Africa, of which the mining sector accounts for 6.5 GW.

“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. Cennergi, Exxaro’s wholly owned energy arm,  last year generated 671 GWh of electricity.

In the past 12 months, Exxaro has pursued eight wind and solar acquisitive growth opportunities, one of which remains subject to a due diligence process review.

Edited by Creamer Media Reporter

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