Exxaro CEO Mxolisi Mgojo. Picture: FINANCIAL MAIL/RUSSELL ROBERTS
Exxaro CEO Mxolisi Mgojo. Picture: FINANCIAL MAIL/RUSSELL ROBERTS

Exxaro Resources, SA’s largest, black-empowered coal miner, is moving into renewable energy as the global transition away from fossil fuels intensifies.

At its results presentation on Thursday, Exxaro CEO Mxolisi Mgojo said that after following a “robust engagement” between the board and management, Exxaro has resolved to adopt a strategy “that will focus solely on new opportunities in the energy security space”. Mgojo said renewable energy is the fastest growing energy sector and so will be core to the strategy.

The growing issue of climate change presents “big risk” to Exxaro’s business but it has resolved to embrace the challenge, Mgojo said.

Coal miners are increasingly coming under pressure as climate-change concerns cause fossil fuels to increasingly fall out of favour with governments and business adopting greener alternatives.

In SA, the integrated resource plan (IRP) envisages a much reduced role for coal in the country’s future energy mix. In the private sector, big emitters have come under pressure to clean up their act. Lenders too are feeling the heat and last week Standard Bank published its policy on funding coal-powered projects and coal mining. 

In September last year, Exxaro announced its acquisition of the remaining 50% stake in Cennergi, an independent producer of renewable power in SA, which provides a key stepping stone in Exxaro’s pursuit of its new strategy, Mgojo said.

He said the strategy is also being driven by a more-drastic-than-expected liberalisation of SA’s energy market, which, Mgojo said, is driven by severe levels of load-shedding that have prompted stakeholders and the government into action. Recently, the government announced that it will clear the regulatory hurdles which have prevented industry from producing energy for its own use. “There are a lot of things being done behind the scenes,” Mgojo said.

On Thursday, Exxaro, the largest supplier of coal to Eskom and SA’s fourth largest producer of export coal, reported a 9% jump in core headline earnings for the year ended December 2019, though this is largely due its stake in Kumba’s lucrative Sishen Iron Ore Company.

The coal business achieved record export volumes in the period under review, but suffered the effects of lower global coal prices largely caused by a glut of cheap gas in the European market. Locally, Exxaro’s coal production and sales were impacted by the delays at Eskom’s Medupi power plant.

Cash from operations in 2019 slid 25% to R5.3bn and core group earnings were 20% lower. Exxaro declared a final dividend of 566c per share.

Though unable to share more detail on Exxaro’s new strategy, as the decision has been taken very recently, Mgojo assured investors that the strategy would be pursued in a measured way that mitigates potential risks and that capital allocation decisions would be sensible.

steynl@businesslive.co.za