Seriti Resources has dived into the renewable energy sector through a deal by subsidiary Seriti Green which will see some R75bn invested on wind farms to generate a total of some 3.5GW of power.
The bulk of this investment will be made in South Africa where some 3GW of power will be generated from wind farms to be built by 2030, Most of those will be located in Mpumalanga where the first 450MW project will be built next year at a cost of around R12.5bn. The balance is to be invested in East Africa.
Seriti is buying a 51% controlling interest in Australian firm Windlab Africa at a cost of R892m. Windlab MD Peter Venn will become an individual investor in the new company holding 15% while the other partners are Rand Merchant Bank (14.5%), Standard Bank (14.5%) and Ntiso Holdings (5%).
Asked to compare Seriti’s strategy with that of Exxaro Resources Venn commented at a media briefing in Johannesburg on Monday that, “ what Exxaro has done to date is very piecemeal – the partnership with Tata Power and Cennergi has created two wind farms.
“This (Seriti Green) is creating a long-term platform play which will build out almost 3.5GW compared to what we have seen to date from Exxaro – about 300MW.”
Venn also held out the long-term possibility of generation capacity throughout Africa being eventually linked up to allow the transfer of power around the continent and even sold into Europe via Morocco.
He commented, “the big opportunity for me over the next 15 years in Africa is the inter-connection market. Today the network exists for us to sell an electron from Cape to Cairo but the contracting structure does not yet exist to do that.
“Over the next 10 to 15 years I think we can get the South African power pool, the East African power pool and the West African power pool talking to each other and we can start seeing cross-border trades occurring.
“The Great Rift Valley running from Ethiopia through to the Drakensberg is a phenomenal wind resource. If you then tie it up with the solar PV and the geothermal energy, East Africa has the opportunity to provide electricity to a vast part of the world. “
“There are regulatory challenges to get through but East Africa has a huge opportunity. If you look at what has happened in South Africa over the past 12 months we have moved from a one-buyer market to a many buyer market and that has made the industry explode. I think that is what is going to happen in East Africa and the rest of Africa as we go forward.”
Venn added that major advances in wind turbine technology had made Mpumalanga a viable and competitive location for wind farms and the existing Windlab Africa team would continue to manage the 3.5GW of renewable energy projects which were planned.
Asked about the overall financial impact on the group, Seriti CFO Doug Gain said “ it will take the best part of eight to ten plus years to build a renewables business with revenue comparable with that we currently have across our coal business derived from the sale of around 50mt of coal.
“The medium to long-term strategy is to have some sort of equivalence in attributable profit generation across both elements of the business to give us a genuine broader energy story. For the medium term we will principally be a weighted coal business.”
Asked whether this diversification would have any impact on Seriti’s strategy of remaining a private operation which was unlisted Teke replied, “We are not going to list. We prefer to keep our business private. We have learnt lessons from running this business in a private space which works well for us.”