SERITI Resources CEO Mike Teke said he hoped a memorandum of understanding (MoU) with Eskom to supply it with renewable power will be the start of a new business for his organisation.
“We are funding this at our own cost and it will be its own division and run as a subsidiary,” Teke said in an interview. The MoU, announced on October 25, will enable Seriti to reduce its carbon dioxide emissions through lower electricity consumption. Approximately CO2 of the firm’s equivalent emissions will be halved to 350,000 tons annually, it said.
The MoU also has Exxaro Resources as a signatory and involves the partners building solar photovoltaic installations in joint venture and independently of one another both on Eskom premises and their own mines supplying Eskom. Exxaro and Seriti comprise about 80% of Eskom’s coal supply.
The MoU has no connection to the $8.5bn renewable funding package agreed at the United Nations’ COP26 summit this month between the US, UK, Germany, France and the European Union with the South African government on behalf of Eskom.
“We will run this internally,” said Teke. “We are looking to appoint someone to run the business which will also look at what to do with our water; how do we commercialise it.”
Exxaro Resources ran into shareholder opposition when it proposed setting up a business in 2018 aimed at achieving similar ends. Investors wanted Exxaro to stick to its core practice of mining coal. But Teke did not anticipate opposition from Seriti shareholders as it was a privately-held company with an aligned shareholder base.
“Shareholders agree with us that we would never give this to another player,” said Teke referring to the prospect that Exxaro was aiming to make Seriti one of its customers. Exxaro announced in October plans to establish itself as an independent power producer as well as look for metals outside of coal such as manganese and copper.
“We are capable of doing our own thing,” said Teke, who added that the solar PV installations could be off-grid or made available to the South African power grid through the process of ‘wheeling’ power.
In May, Seriti completed the purchase of coal mines from South32 which added export production to its domestic mines bought in 2018 from Anglo American. Despite now having the benefit of export prices, Teke said Seriti wasn’t interested in taking a listing on the Johannesburg Stock Exchange. “I believe the market is not ready for a listing like that.”
Anglo American spun out the balance of its thermal coal assets (post the sale to Seriti) into Thungela Resources in June. After a few days of selling pressure, shares in Thungela surged in line with rising export prices. Teke said Seriti was now also benefiting from decent prices although they had softened lately.
“We have been transformed at the revenue line,” said Teke of the South32 acquisition. “There are some good projects coming out of it,” he said.