Transcript Finance

Energy for a low-carbon economy
Presentation by Ernst Venter
Executive General Manager
Business Growth
11 November 2010
Contents
•
South African context
•
The changing energy environment
•
Exxaro’s response
– Energy and carbon management programme
– Energy business
•
Exxaro’s contribution to national objectives
•
Road ahead
2
South African context
Government objectives for economic growth
Six key sectors and activities:
1. Infrastructure expansion
2. Agriculture and agro-processing
3. Mining and mineral beneficiation
4. Green economy and associated services
5. Manufacturing sectors identified in IPAP
6. Tourism and selected services sectors
3
The energy environment within our economy is changing
From:
To:
Energy oversupply
Energy constrained
Generation Capacity vs Electricity Demand
Low Demand Growth
100,000
90,000
Long term IPP
Opportunities
80,000
70,000
Available Capacity
MINUS 17% Reserve
Margin
MW
60,000
50,000
High Demand Growth
40,000
Moderate Demand
Growth
30,000
20,000
Linear (Low Demand
Growth)
10,000
2007
2008
Source: Fieldstone Africa (Pty) Ltd
2009
2010
2011
2012
2013
2014
2015
2016
Year
2017
2018
2019
2020
2021
2022
2023
2024
2025
4
The energy environment within our economy is changing
From:
To:
Cheap electricity
Rising electricity prices
R 1.20
R 1.15
R 1.10
R 1.05
R 1.00
R 0.95
R 0.90
R 0.85
R 0.80
R 0.75
R 0.70
2013
2014
2015
2016
2017
2018
2019
Base Case
Base Case with Carbon Tax
Balanced Scenario
Balanced Scenario with Carbon Tax
2020
2021
5
The energy environment within our economy is changing
From:
To:
Carbon intensive
Carbon constrained
MtCO2e/a
6
Exxaro developed a strategic response to this changing
environment
Analysis of business
environment
Energy demand projections indicate a power
supply shortage in South Africa
Generation Capacity vs Electricity Demand
Existing businesses
Low Demand Growth
100,000
Can we match moderate demand growth?
90,000
Long term IPP
Opportunities
How?
At what cost?
80,000
70,000
MW
50,000
• Energy security
• Carbon footprint
• Improving energy
efficiency
• Carbon offsets
Available Capacity
MINUS 17% Reserve
Margin
60,000
Short term: How? Peakers,
Co-gen, Renewables?
High Demand Growth
40,000
Moderate Demand
Growth
30,000
20,000
Linear (Low Demand
Growth)
10,000
2007
2008
2009
2010
2011
2012
2013
2014
Source: Fieldstone Africa (Pty) Ltd
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
Year
Demand is already suppressed
Energy Supply Shortage
+
R 1.20
R 1.15
Business response:
Prepare for a low-carbon,
energy constrained future
R 1.10
R 1.05
R 1.00
R 0.95
R 0.90
R 0.85
R 0.80
R 0.75
R 0.70
2013
2014
2015
2016
2017
2018
2019
Base Case
Base Case with Carbon Tax
Balanced Scenario
Balanced Scenario with Carbon Tax
2020
2021
Energy Price Pressure
+
Business growth
opportunity
Develop
portfolio
• Base load IPP
of energy
• Renewable energy projects
• Energy and carbon
trading
Specific strategies have been developed to drive
implementation of our response
Carbon Constrained Future
7
Exxaro developed a strategic response to this changing
environment
Analysis of business
environment
Energy demand projections indicate a power
supply shortage in South Africa
Generation Capacity vs Electricity Demand
Existing businesses
Low Demand Growth
100,000
Can we match moderate demand growth?
90,000
Long term IPP
Opportunities
How?
At what cost?
80,000
70,000
MW
50,000
• Energy security
• Carbon footprint
• Improving energy
efficiency
• Carbon offsets
Available Capacity
MINUS 17% Reserve
Margin
60,000
Short term: How? Peakers,
Co-gen, Renewables?
High Demand Growth
40,000
Moderate Demand
Growth
30,000
20,000
Linear (Low Demand
Growth)
10,000
2007
2008
2009
2010
2011
2012
2013
2014
Source: Fieldstone Africa (Pty) Ltd
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
Year
Demand is already suppressed
Energy Supply Shortage
+
R 1.20
R 1.15
Business response:
Prepare for a low-carbon,
energy constrained future
R 1.10
R 1.05
R 1.00
R 0.95
R 0.90
R 0.85
R 0.80
R 0.75
R 0.70
2013
2014
2015
2016
2017
2018
2019
Base Case
Base Case with Carbon Tax
Balanced Scenario
Balanced Scenario with Carbon Tax
2020
2021
Energy Price Pressure
+
Carbon Constrained Future
Business growth
opportunity
Develop
portfolio
• Base load IPP
of energy
• Renewable energy projects
• Energy and carbon
trading
8
Energy and carbon management strategy
Sustainability
reporting
Low carbon
economy
Energy efficiency
management drive
Environmental
regulatory
environment
Energy
procurement
CURRENT REALITY
• High carbon economy
• Reactive to legislation
• Identified threat & commitment
• Part of third world – huge window of
opportunity
• High level management commitment
• Energy strategy
Mitigation
opportunities and
clean technologies
FUTURE INTENT
• Thrive in low carbon
economy
• Pre-empt legislation
• Improve competitive
intelligence
• Participate in
o
o
o
o
Clean Energy
Renewable resources
Carbon trading
Co-generation
• Brand, image & perception
9
2010… An Exco pledge reconfirms Exxaro to improved
energy efficiency and reduction of carbon emissions
10
The EXCO pledges its support for the
Energy and Carbon Management
programme and reconfirms the
commitment to improve energy
efficiency by 10% and reduce our carbon
emissions with a similar 10% by 2012
Sustainability
Reporting
The business planning process
will cascade this target to
practical objectives at each BU
These targets will be included in
the EGM and BU Managers’
performance contracts
Low Carbon
Economy
Energy Efficiency
Management Drive
Environmental
Regulatory
Environment
Energy
Procurement
CURRENT REALITY
• High Carbon Economy
• Reactive to legislation
• Identified threat & commitment
• Part of third world – huge window of
opportunity
• High level management commitment
• Energy Strategy
Mitigation
Opportunities and
Clean
Technologies
FUTURE INTENT
• Thrive in low carbon
economy
• Pre-empt legislation
• Improve competitive
intelligence
• Participate in
o
o
o
o
Clean Energy
Renewable resources
Carbon trading
Co-generation
• Brand, Image Perception
While implementing our strategy, we have made significant
progress...
Some of our key successes are the:
•
Development and implementation of data processes for effective and efficient reporting
•
Eskom electricity baselines developed (PCP readiness)
•
Energy efficiency champions appointed at all business units
•
Increased awareness on energy efficiency at business units
•
Development and implementation of capital project guidelines
•
Ownership of energy efficiency at business units through clear role definition and
empowerment of individuals
•
CDP developed and good exposure received
11
We have achieved tangible successes
12
•
Design of Grootegeluk Medupi Expansion Project:
– Approximately 29% more energy efficient
– Zero effluent coal beneficiation
– Eco-friendly housing reducing carbon emissions by 60%
•
Co-generation plant at Namakwa Sands smelter in final stages of feasibility to bring
about 17% saving in energy and carbon emissions
•
Biodiesel tests successfully conducted at Leeuwpan mine, being followed up with a full
concept study
Exxaro developed a strategic response to this changing
environment
Analysis of business
environment
Energy demand projections indicate a power
supply shortage in South Africa
Generation Capacity vs Electricity Demand
Existing businesses
Low Demand Growth
100,000
Can we match moderate demand growth?
90,000
Long term IPP
Opportunities
How?
At what cost?
80,000
70,000
MW
50,000
• Energy security
• Carbon footprint
• Improving energy
efficiency
• Carbon offsets
Available Capacity
MINUS 17% Reserve
Margin
60,000
Short term: How? Peakers,
Co-gen, Renewables?
High Demand Growth
40,000
Moderate Demand
Growth
30,000
20,000
Linear (Low Demand
Growth)
10,000
2007
2008
2009
2010
2011
2012
2013
2014
Source: Fieldstone Africa (Pty) Ltd
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
Year
Demand is already suppressed
Energy Supply Shortage
+
R 1.20
R 1.15
Business response:
Prepare for a low-carbon,
energy constrained future
R 1.10
R 1.05
R 1.00
R 0.95
R 0.90
R 0.85
R 0.80
R 0.75
R 0.70
2013
2014
2015
2016
2017
2018
2019
Base Case
Base Case with Carbon Tax
Balanced Scenario
Balanced Scenario with Carbon Tax
2020
2021
Energy Price Pressure
+
Carbon Constrained Future
Business growth
opportunity
Develop
portfolio
• Base load IPP
of energy
• Renewable Energy projects
• Energy and carbon
trading
13
Exxaro Energy’s vision
•
Exxaro Energy’s strategy is based on Exxaro’s view that there is a business opportunity
in the Southern African energy environment. Exxaro Energy’s vision is to:
Become the leading cleaner energy
Independent Power Producer in
Southern Africa
14
Exxaro is developing a portfolio of energy projects
Wind Power:
Two wind farms under development on the West Coast and at
Tsitsikamma
Solar Power:
Conducting pre-feasibility studies for Concentrating Solar and Solar
Hybrid power plants in the Limpopo province and Northern Cape
Co-generation:
Final stages of feasibility for installation of co-generation at
Namakwa Sands smelter, various other projects in development
Coal Bed Methane:
Exploration and drilling to prove economic gas flow in Botswana
Base Load IPP:
Desk top study completed – utilising cleaner technology and signed
> 1000MW of term sheets with potential industrial customers
Bio Fuels:
Concept study to replace 40million litres of diesel in first phase,
increasing energy and food security at the same time
15
Exxaro’s contribution to national objectives
Government objectives for economic growth
Six key sectors and activities:
1. Infrastructure expansion
2. Agriculture and agro-processing
3. Mining and mineral beneficiation
4. Green economy and associated services
5. Manufacturing sectors identified in IPAP
6. Tourism and selected services sectors
16
The road ahead
Government
•
Finalisation of IRP2010
•
Implementation of REFIT programme
•
Establishment of a COFIT programme
•
Creation of friendly environment for IPPs through:
• Establishment of an Independent System and Market Operator (ISMO)
• Support for bilateral energy agreements
• Friendly grid access and wheeling regulations
•
Practical support to industry for achievement of New Growth Plan
Exxaro
•
Inspirational leadership through meaningful advocacy, facilitation and
commitment
•
Ongoing focus on improving energy efficiency of operations
•
Reducing our carbon footprint and offsetting the balance
•
Successful establishment of a cleaner energy business and implementation of
energy projects
For sustainable energy security in Southern Africa
17