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Cape Town - South Africa’s state-owned development finance institution says it is looking at investing in more coal mines to support the national power utility Eskom’s coal-fired plants.
The Industrial Development Corporation’s divisional executive of mining and manufacturing industries Abel Malinga said ways were being sought to “diversity the energy mix” in South Africa “and we have invested a lot of money in renewable energy”.
IDC spokesperson Mandla Mpangase said about R13.7bn had been invested in renewable energy projects. The corporation had adopted a proactive approach in developing the country's renewable energy market.
The IDC was also active in the demand-side management, aimed at making South African industry more competitive by reducing energy purchase costs as well as reducing the demand on the power network. As part of this approach, it has launched a R500m green energy efficiency fund - in 2012 - to promote energy efficiency and self-use renewable energy projects in the industrial sector.
Projects supported aimed to cut electricity consumption by at least 20%.
The fund is backed by KfW, a German development agency. Under this fund, the IDC has supported 22 projects amounting to R250m. In addition R120m had been fully committed of the remaining R250m.
Asked whether the IDC would consider investments in new coal mines as Eskom was dependent on coal-fired stations, Malinga said: “We are looking at all coal potential in South Africa. It could be in the Waterberg (near the coal-fired plant Medupi)."
READ: Tripped coal stations add to load shedding burden
He also said that the IDC was ready to play “a catalytic role” to ensure that there was the necessary infrastructure – including roads, rail, rolling stock and water provision to support new mines in regions such as the Waterberg.
Such a role, he said, would be based on a sound business plan where “private and public institutions will be invited to invest in the provision of relevant infrastructure in order to stimulate regional economic growth”. It would be an investment decision.
“We (however) will not do something that does not make economic sense”. If, however, “something is economically viable”, the IDC would be ready to invest.
Noting that the IDC already had coal mining interests in Exxaro [JSE:EXX] in which it has a 15% stake, Malinga said if new mines were identified “we will provide the risk capital to be able to take the project to bankable feasibility stage”.
The IDC will make sure the required environmental impact assessment was carried out. “We will ensure that the baseline (environmental) studies are done before (the mining project) is implemented."
Exxaro operates the Grootegeluk coal mine which supplies Eskom's coal-fired Mathimba power station. It also has a contract to supply Medupi when it is up and running.
The shareholding and funding that the IDC “may consider” of a new coal mining project would be in line with “the risk that we are taking,” said Malinga, on the sidelines of the Mining Indaba in Cape Town.
VISIT Fin24's Mining Indaba Special
Last week the IDC’s chief executive Geoffrey Qhena said it would not consider selling its holdings in listed companies in order to take pressure off the cash-strapped power utility, Eskom. It was reported by Reuters and Bloomberg that the IDC had some R46bn in assets.
It has stakes in Kumba Iron Ore [JSE:KIO], Sasol [JSE:SOL], the world’s biggest convertor of coal into petroleum, BHP Billiton [JSE:BIL], Hulamin [JSE:HLM] and Sappi [JSE:SAP], the papermaker.
Qhena was reported as saying that his entity had not been approached by government to sell its stakes. However, Finance Minister Nhanhla Nene hinted in the medium term expenditure framework in October last year that disposals could include stakes in publicly traded companies – owned by government or by the state through the IDC.
READ: No new govt guarantees for Eskom
A Barclays note last week stated that the sale of private IDC held assets was the fastest and most likely way to provide funds for Eskom, which started load shedding at the end of last year for the first time since 2008.
This is attributed mainly to ageing and poorly maintained coal-fired power stations.
