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Anglo signs deal for new renewable energy venture

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FIFI PETERS: Here’s an interesting fact. The mining industry gets around 5% of its current power needs from renewable energy sources like wind and solar, and I saw that from a PwC report a little earlier today. The rest of its energy presently comes from non-renewable sources like coal, and the mining sector is Eskom’s biggest customer presently.

In its own individual attempts to become a greener citizen, as it were, and reduce its reliance on Eskom, Anglo American has teamed up with EDF Renewables to create a new company called Envusa Energy. The company, which will begin by launching a 600MW wind and solar project in its first phase, eventually hopes to develop a regional renewable energy ecosystem here in South Africa.

To give us a sense of what that means exactly, I’m joined by Pierre Herben, the group head of carbon neutrality at Anglo American. Pierre, thanks so much for your time. Let’s start off there, with just your own power needs and the 600MW of renewables that you are building in this new entity – how that changes the game for you.

PIERRE HERBEN: Yes, thank you so much for the question and the invitation. Actually it is the start of a big transformation for the group because we have a target to reach carbon neutrality before 2040 with a significant part of it already realised by 2030; so it’s just eight years from now.

We looked at different ways of reaching that, and we’ve got a dozen sites in South Africa. We are a big ……1:52 and a complex, I would say, ecosystem of mining. Reaching carbon neutrality means that the main element is the fossil fuel, as you just said, the emissions coming from Eskom, I would say, the electricity producer’s coal. And we saw that the timing for the transformation was such that we had to play a role in that. So that’s why we [contacted] EDF Renewables. They’re extremely professional, they have a good reputation in the country, and we were looking for a company sharing the same values we have. And then the work started.

So we’ve a vision to reach this and completely transform our electricity systems in a decade. To do that, we need a lot of renewable [energy] – anything between three and five gigawatts. It’s a blend of solar and wind.

The 600MW is just to start, but it already accounts for more than two million tonnes of carbon abatement, so a reduction in emissions in the coming few years. So it’s significant.

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FIFI PETERS: In terms of the paperwork around the first phase, in the first phase, is everything signed – I’s dotted, Ts crossed, as it were, or is the paperwork not that rigorous, given that there isn’t a limit right now on companies, or even individuals, in terms of the power that they generate for themselves?

PIERRE HERBEN: No. The paperwork is going on. I would say we are ticking all the boxes. When I looked at the various projects they are at various stages of advancement, but we have seen a radical change in the regulation, and the government has really taken the opportunity to start performing and enabling what we call the Just Energy transition. So I think it enables. We are still experimenting; it’s not easy to do that, and sometimes for very good reasons like biodiversity and the impact you have on the population, on the communities. So I think there is a sense to everything. But I would say we are pretty well aligned and on the way.

FIFI PETERS: How much is it going to cost you – the first phase in particular?

PIERRE HERBEN: It’s a good question, but it’s 600MW, mainly solar. So just on the wind, anything on a ballpark figure of between $600 [million] to $1 billion – not rands.

FIFI PETERS: It’s a lot of money. My brain doesn’t [work] fast enough to do that conversion into rands, but there’s a lot of zeros there. How are you going to pay for it?

PIERRE HERBEN: Well, actually we will fund it. We are starting the investment phase and we’ll have a set of lenders, so it’ll be leveraged by that mainly. But we’ll also put some of our own capital into it.

Actually we are two companies at the moment, but we are going to launch a selection for a BEE partner in the game. So it will, I would say, reduce the capital investment per company.

FIFI PETERS: I think at current exchange rates, if we look at the high end of the cost estimates at $1 billion, I think you said, that’s around R18 billion, possibly.

PIERRE HERBEN: Yes.

FIFI PETERS: A lot of money, Pierre. But I want to circle back. You’re looking for a B-BBEE partner and I think that a lot of people are interested in that and would like to find out the criteria to be your B-BBEE partner as Envusa. What are you looking out for?

PIERRE HERBEN: I think it’s a range of attributes for this partner. It starts with the value. It’s really about safety. It is also about capability to participate and deliver a project of a certain complexity. It is about reputation also. We look at that with the lens of the Just Energy Transition, so what are the credentials of this partner with regard to communities? And how can we, by building this ecosystem, deliver not just energy to decarbonise and operate our operations, but create actually a flexible adaptive system of energy that will provide opportunities beyond the mines. By ‘beyond the mines’ I mean that, if there is anything we can do locally with communities as we go for decarbonisation, should we look at other activities? For instance, we launched this hydrogen truck recently. We’ve got a first very large-scale hydrogen truck running in Mogalakwena. That means that we are going to expand further, beyond mining activities, to truck fuel, but also potentially acting as a catalyst for what you call the Hydrogen Valley, and other activities that would actually start to connect as decarbonisation is happening in the country. A partner will be able to drive that journey with us.

FIFI PETERS: I think I’ll tick those boxes. I’ll be sending you my proposal after this interview. But, jokes aside, this regional renewable energy ecosystem, when you say ‘regional’ are you looking at potentially the end-game being able to supply power not only to your mines but to the rest of the continent also?

PIERRE HERBEN: Yes, exactly. It started from the mine. But around the mine we found it very difficult and expensive to come to 100% a year ago. That means redundancies and waste, and we had waste and losses of energy because there is not enough energy on this planet. We need to really develop a system that is as efficient as it can [be].

Then we saw that if we would de-zoom from the site to a region, a province, but then to the country potentially as well, that’s what we are looking at – a neighbouring country like Namibia. You can tap into resources like wind resources that are very good in Namibia, very good in, I would say, the Eastern Cape in South Africa. Combining the different resources in the network you realise that you really get a much better energy coverage around the clock, but also seasonally across the full year. So it gives you more robustness and more stability as the systems get bigger. And then of course, when you have that you might think, okay, what next? But this is not for tomorrow. It’ll be for the end of this decade(?).

FIFI PETERS: All right. That means you and I are going to be talking a lot more, sir, but we’ll leave it there for now. Thanks so much. Merci beaucoup for your time. Pierre Herben, group head of carbon neutrality at Anglo American has been talking about their latest venture in renewable energy.

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