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Probably by the middle of next year, if things go well, Exxaro will likely achieve financial close on a renewable energy project, which, from a sizing perspective, will probably be north of 100 MW,and located in Mpumalanga.

This was made clear by Exxaro MD for Energy Leon Groenewald in response to Mining Weekly on progress being made by the Johannesburg Stock Exchange-listed company in its partnership with independent energy company Enertrag.

Last month, financial close was achieved for the 68 MW Lephalale solar project to supply renewable energy to Exxaro's Grootegeluk coal mine in Limpopo. This was announced by Cennergi, a subsidiary of Exxaro Resources, Grotegeluk's owner and operator. Cennergi will supply renewable energy to the flagship mine for 25 years through a power purchase agreement.

Of the Mpumalanga project, Groenewald added: "We're working very hard at it. It's an interesting and tough project, but we're looking forward to that and the good part is that the work is very complementary to the solar profile, so that helps a lot in terms of saving electricity, plus electricity cost and also having Scope 2 reductions. We'll keep you posted as that progresses."

As reported by Exxaro in April, its partnership with independent energy company Enertrag aims to develop wind and solar solutions for the mining industry in Mpumalanga.

"We've basically done all of the permitting exercises, so now we're in the conversation regarding offtake and financing.

"Just to give you some idea, the project per se is a bit more complex than the 68 MW Lephalale solar project because we're looking at multiple offtakers with different life-of-mines and then project financing.

"Where Grootegeluk was one project with a long power purchase agreement, a single off taker and able to be project financed, here we're looking at a different configuration, so it's interesting and we're looking forward to that," Groenewald added.

On Thursday, August 17, Exxaro reported that worsening electricity shortages are presenting opportunities for its renewable energy business, which delivered improved 17% higher half-year revenue. This was on a 28% overall decrease in earnings before interest tax depreciation and amortisation (Ebitda) to R7 661-million for the coal-mining company.

Mining Weekly: Is that wonderful 80% margin that you report on your renewables business sustainable?

Groenewald: Yes, it's an industry norm, but what you must understand so that's an Ebitda margin. On a net profit margin, you've got to take the cost of debt into consideration and that's different, but we seeing 70% to 80% is not outside the norm. If you look at your cost levels, they are fairly low and most of them are CPI linked. It is true that in some cases, you have a bit of pushback in some of your operation and maintenance contracts that have a dollar or a Euro component and that makes it slightly challenging, but over the long term those numbers are, I think, fairly predictable, as 80% is not outside the norm and we see new projects we are testing as well looking to be okay.

As reported earlier by the black empowered diversified resources and renewable energy company Exxaro, 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 its entry into the energy market. The potential pipeline ranges from 370 MW to 975 MW.

It so doing, the company is mindful of South Africa's electricity grid constraints, which remain a challenge.

There are around 9 GW of renewable energy projects under development in South Africa, of which the mining sector is said to account for 6.5 GW.

Having created renewable-energy company Cennergi in 2012, Exxaro built two wind farms with a combined capacity of 229 MW in the Eastern Cape in 2016, which is underpinning its foray into solar power.

By accelerating its d...