Exxaro and Tata launch new energy company: Sipho Nkosi - CEO, Exxaro
ALEC HOGG: Christy Filen is Moneyweb’s mining editor and she’s been having a look at an interesting development. Before we bring in Sipho Nkosi, the chief executive of Exxaro, give us some background, Christy, on this partnership between Exxaro and Tata Power.
CHRISTY FILEN: Good evening, Alec. What we are seeing here is Exxaro with its portfolio of mainly coal assets looking to diversify and maybe reduce its carbon footprint and ensure the sustainability of the business by looking for a partner to further its renewable aspirations, renewable energy projects.
ALEC HOGG: It is interesting, Sipho, to hear that you guys in the coal game are doing a deal with an Indian company, a joint venture, where you become producers of renewable energy, which is the furthest thing from coal that I guess one could consider right now.
SIPHO NKOSI: Indeed, thanks, Alec. But I mean it's not, actually, because all of it is energy. Coal is a fuel that we use in producing energy, and therefore it's in the same space. But there are a couple of things that have encouraged us to go this route. One of them is that coal is always seen as the baddie – how shall I put it – in the world, and I think as a very responsible citizen of South Africa we felt that it was important to balance our carbon footprint and to reduce it. And through this process we saw a business opportunity in terms of getting into the renewable business. We've been doing this for the last four years, just starting with this business. And we believe that this business is not just about being responsible but also about generating money for our own shareholders. And I think it's a good business.
ALEC HOGG: Why did you partner with Tata, with an Indian company? Were there not better options perhaps here at home?
SIPHO NKOSI: … We looked at Tata, we looked at the appetite they have as far as this business is concerned, we looked at the record, we looked at the kind of megawatts they currently have in this space, we looked at the manufacturing capacity that they have, because it's not only about generating power, but it is also about looking after the communities where these projects are located, and we've seen what power has done throughout India where they are currently placed. We believe that a combination of what Exxaro can do and what they are doing will uplift these communities and help us provide the necessary requisite jobs in South Africa.
ALEC HOGG: Sipho, you are at the launch, and that’s why we are talking to you on a cellphone – you are one of our regular visitors here in the studio – and the launch is on the campus. Nice to be talking with you. Have you got a big crowd there?
SIPHO NKOSI: Indeed, we had a full house, really in terms of all the people that were invited. We had also ministers accepting the invite to come to be with us, because I think this is a ground-breaking announcement in South Africa, where companies – particularly Exxaro is fairly new. But we are looking to the future and we believe that the things that we are doing toda, 50 or 100 years from now will be of a [great service] to this country and the whole of Africa, so it is important that we do them today.
ALEC HOGG: Sipho Nkosi. Not all the important people were invited, David. I see you didn’t crack…
DAVID SHAPIRO: I'm very upset because it's my biggest shareholding.
Is this more – and I am asking Christy as well – manufacturing? Or what's renewable energy? It’s really manufacturing rather than mining.
ALEC HOGG: Well, it's putting up solar power panels and…
DAVID SHAPIRO: It's not mining.
CHRISTY FILEN: It's not mining, but as Sipho rightly said, it's also electricity generation. But ja, to support those renewable energy projects I'm sure there’ll be something on the cards to develop local manufacturing sites to try and reduce the cost and support job creation in the country.
ALEC HOGG: It is far away from mining coal, though; the coal-based power stations push out dirty energy. I suppose they are feeling a little bit guilty: “we’d better do something renewable”.
But it is interesting, Christy, that South Africa has been really strongly pushing the whole renewable energy side, and it's one of those hidden success stories of government incentives that, when I as talking to a friend of mine who’s chairman of a construction company, he was telling me that if you go and start looking at renewable energy you’ll find out that we've done an enormous amount in South Africa that hasn’t actually hit the headlines.
CHRISTY FILEN: There’s been a lot of growth – we've seen recently that the applications for the renewable projects to government closed now in March, and I believe Exxaro did participate in that. So it is gaining momentum, Alec, but still has a long way to go, I think.
ALEC HOGG: Well, the investment community certainly liked the announcement. Exxaro was doing the best of all of the Top 40 shares today. It only lost 0.25%.
• Subscribe to a daily email of transcripts from Moneyweb Radio - click here
It’s not just about a feasible business plan.