JOHANNESBURG (miningweekly.com) – The investment by diversified coal, energy and ferrous resources group Exxaro Resources in the renewable energy company Cennergi will further support the company’s decarbonisation strategy, Exxaro CEO Mxolisi Mgojo said when the JSE-listed company reported sterling half-year financial results highlighted by a hugely stepped up interim dividend payout.

Full details of the decarbonisation strategy would be provided at Exxaro’s Capital Markets day on September 20, Mgojo said at the company’s results presentation covered by Mining Weekly. (Also watch attached Creamer Media video.)

He said that Exxaro’s strategy to transition to a low-carbon business included building a renewable energy business that would protect the value of the coal business through self-generation while building market possession in emerging opportunities for distributed energy.

“It also includes using our mining capabilities to move beyond coal and into low-carbon minerals and develop a comprehensive impact investment approach to ensure the socioeconomic resilience of our host communities during this transition,” Mgojo said.

Critical to achieving this strategy was, he said, Exxoro’s capital allocation framework, which remained relevant and disciplined.

“We’ll not invest further for growth in thermal coal but rather harvest value from the recent capital expenditure programme and continue to fulfil our customer needs,” he added.

Cash flow generation would be balanced between reward to shareholders from current operations and value creation.

Exxoro’s renewable energy business Cennergi put up a consistent renewable energy performance, with its two wind plants averaging a combined 734 GWh electricity generation with 97% availability.

“The likelihood of Eskom playing in the renewables sector will accelerate the decarbonisation of industry and create low-carbon growth opportunities for the economy,” said Mgojo.

“The COP 26 event in Glasgow is significant in relation to the COP 15 and Paris Agreements in terms of the financing of the energy transition and it’s impacts. We will be active participants at the event with a view of informing and shaping our just transition strategic direction towards a low-carbon future,” he said.

“Local dynamics are clearly negative to both immediate operational stability and long-term investment efficiency and attractiveness. The issue of Covid-19, the recent social unrest and Transnet need to be addressed separately and holistically with urgency.

“While they are interdependent, they do require prioritisation and framing based on practical and time-based actions, which must be agreed amongst all stakeholders and executed at speed and scale.

“They do have dire implications on South Africa Incorporated. Business and government have been engaging intensively to identify key themes to a short-term recovery and long-term economic performance such as closing our country’s inequality gaps, restoring confidence in our economy and strengthening national security.

“In this regard, government and business have agreed on their key respective actions. From a government point of view, there is definitely a requirement to unblock red tape, address labour issues and give some policy directives in the short term to support the growth agenda and enable rapid creation.

“Leadership, including the President, must be visible and be seen as being in control of the broader national challenges. A more proactive communication that instils confidence in our economy and reverses some negative perceptions arising from the last few weeks, must be undertaken with great vigour.

“From the business side, business will augment government efforts by identifying areas of local support in vulnerable communities and executing accordingly, mobilising practical ideas for job creation linked to geographic areas where they are located and providing collective support to small and medium-sized businesses, especially those operating in rural and township areas,” said Mgojo.

Sixty six entities comprising 44% being 100% black-owned and 26% women-owned, which are being supported by Exxaro, have grown total revenues by 160% to R1.2-billion since inception of a programme underpinning them in 2018. A total of 1 102 additional jobs were created including a growth in paid salaries of 185% over the three-year period.

The programme is one of the critical drivers of Exxaro’s objective of being a catalyst for economic growth and environmental stewardship as the company embarks on its transition towards having a low-carbon business portfolio.

“Business has committed to collaborating with government and we’ll keep the momentum going,” Mgojo said.