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Sasol signs 289MW renewable energy deal

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You can also listen to this podcast on iono.fm here.

FIFI PETERS: Sasol was one of the best-performing stocks on the JSE today, up almost 5% after it released two interesting updates, one of which we’ve just spoken about with Wayne McCurrie from FNB – its trading update and how it is doing in the wake of some of the challenges out there, load shedding as and the logistical challenges at Transnet.

The other update reflects on its plans to reduce its carbon emissions in the race to net zero that we are seeing most companies embark on. Sasol – which you may or may not know is the largest emitter of greenhouse gases in South Africa after Eskom – said that it had signed three power purchase agreements [PPAs] for almost 300MW of wind energy. This also comes as South Africa continues to experience the worst round of power cuts in our history due to the constant plant breakdowns over at Eskom.

We have Danie Cronje, the senior vice-president for hydrogen development at Sasol for more on this. Danie, thanks so much for your time. The focus is on the three renewable energy projects that you have assigned. Talk to us about those and how much of a game-changer these projects are on your renewables journey.

DANIE CRONJE: Good afternoon Fifi, and good afternoon to the listeners. Yes, we are very excited to announce the signing of the three power purchase agreements today. These are important in our overall decarbonisation strategy, really from two aspects.

On the one side, the 69MW wind project that we’ve pronounced with Msenge is going to supply renewable energy to our Sasol work operations. That is going to be used to produce green hydrogen from our operations in Sasolburg, and that is set to be online towards the end of the year.

The other part of this is the two power purchase agreements that we signed with Enel Green Power, and those are for our Secunda operations, supporting our decarbonisation strategy and ambition that we’ve got for our Secunda operations over the longer term. So that is aligned with our strategy and the actions we’re taking to achieve our net-zero goal by 2050.

FIFI PETERS: So the power purchase agreement with Msenge, you say, is going to go towards the Sasolburg operations. Will the 69MW that you’ve just announced power the entire operation?

DANIE CRONJE: It is specifically structured to power our electrolysers that we’ve got in that facility. That facility uses a lot more power than 69MW, but in order for us to use and repurpose that electrolyser to produce green hydrogen it needs renewable energy, and the power that we will be purchasing through that agreement will then go into powering our electrolysers for the green hydrogen production.

FIFI PETERS: And what is the end game for the green hydrogen that you’ll eventually be producing? Where will that go? Will that be for your own operations or could some of that go to other partners?

DANIE CRONJE: The plan is really to sell that to our customers. So it’s very unlikely that we’ll use it on our own operations for now. We do at the moment already have customers taking hydrogen from our operations in Sasolburg, but that’s grey hydrogen which is based on fossil fuel. So we are in discussions with our customers to really get them to procure the green hydrogen from us in future.

FIFI PETERS: So your partners, Msenge and the French gas company Air Liquide, how did you come to choose them?

DANIE CRONJE: Air Liquide is our partner together with whom we are procuring the renewable energy in the Secunda site. Air Liquide owns our separation units at Secunda.

So together – Air Liquide and us, Sasol – have signed a procurement agreement with Enel Green Power. We’ve gone through quite a detailed process over the last two years, where we went out to the market and asked for bids to come in for renewable energy power.

Those bids were then submitted to both Air Liquide and ourselves. We’ve a joint working committee that went through the selection process based on a number of criteria, and then selected a few independent power producers with whom we are now negotiating, closing out the PPAs.

So now, with the first tranche that we are announcing, our ambition there is to jointly procure 900MW of renewable energy in the foreseeable feature.

FIFI PETERS: Are you able to give us the value of these agreements?

DANIE CRONJE: The value of these agreements is still being negotiated in terms of the tariffs. Once we’ve reached financial close, which is set [for] later in the year, that will be better known.

FIFI PETERS: Negotiations are still going on, that’s what you’ve just said. So are those the criteria, the conditions that are still outstanding for all systems to go ahead?

DANIE CRONJE: These contracts we’ve signed, the PPA agreements, [need] regulatory and financing approvals and final adjustments to the agreed tariffs that will be effected as we reach financial close. Those are sort of normal for these types of contracts to be open at this point, and will be closed out as we put them through financial close.

FIFI PETERS: Which is expected to take how long?

DANIE CRONJE: The financial close is anticipated to take us about six months. It may be a bit sooner for Msenge. They are a bit more advanced with their processes, so we hope to reach financial close with Msenge a bit sooner, in the next two months. But Enel is scheduled to close sort of midway through the year.

FIFI PETERS: In terms of cost, while these two agreements are expected to help you lower your carbon emissions, what does this do to the cost of your energy bill? Are there any potential savings that could be forthcoming also?

DANIE CRONJE: It depends on how we finally land the tariffs. That’s still open as we go through financial close, but it’ll be very similar to the Eskom tariffs, or a bit cheaper. It’s not easy to call at the moment, and that is due to the financial-close process that needs to be completed.

FIFI PETERS: Okay. In terms of Eskom, how is load shedding impacting the business?

DANIE CRONJE: A couple of things here. Our operations run on a 24-hour basis, and need power throughout that period. So we are in many ways dependent on Eskom to supply us throughout that period. But it’s important to know that we also generate about 50% of our own power, and between Eskom and our own power generation we have the ability then to keep our plants running for the full 24 hours of each day.

FIFI PETERS: It sounds like you’re saying that load shedding isn’t having a material impact on your business, given that you power quite a significant amount of your energy needs yourselves?

DANIE CRONJE: Not from an operational perspective. Where it does have a big impact is of course on our customers and the supply chain processes lower down.

FIFI PETERS: Would you say that load shedding and the really persistent power cuts could potentially accelerate this push towards diversifying energy sources [more] than would have otherwise been the case if there was a constant power supply from Eskom?

DANIE CRONJE: Certainly what we do know is that these power agreements and supplies of power are going to alleviate, overall, the ask [from] the Eskom grid. We therefore are, from our perspective, pushing very hard to get the renewable power into our operations.

With that, that puts released power back into the grid for the rest of South Africa and shifts power, and assists in eliminating some level of load shedding, I hope, through the time.

But it is high priority for us and, other than just making sure that we are well on track for our decarbonisation journey, it will also benefit the overall South African electricity supply.

FIFI PETERS: Danie, thanks so much for taking the time to join us, updating us on the green journey, the renewables journey that Sasol is taking there. Danie Cronje is senior vice-president for hydrogen development at Sasol.

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