ELECTRICITY AND MINING IN SOUTH AFRICA

Transcription

1 ELECTRICITY AND MINING IN SOUTH AFRICA Nikki Fisher, Coal Stewardship Manager, Coal South Africa 25 March 2015 EXTERNAL

2 1. The Mining Sector in South Africa 2. Anglo American and Electricity 3. SA s Energy Future 4. The Way Forward

3 MINING IN SOUTH AFRICA An overview 8.3% Down from 8.6% in 2012 DIRECT GDP CONTRIBUTION 12.2% Down from 12.6% in 2012 CONTRIBUTION TO INVESTMENT R Billion In 2013 MINERAL EXPORT SALES 510,000 In 2013 DIRECT JOBS R 6.42 Billion In 2013/2014 ROYALTIES Source: Chamber of Mines - Fact and Figures ,000 In 2013 INDIRECT JOBS 3

4 THE STATE OF THE SA MINING INDUSTRY 2013/2014 global impairment loss of $70 billion Commodity price decreases: Commodity December 2013 March 2015 Coal $85 $63 26% Platinum $1440 $ % Iron ore $135 $63 53% Increasing cost of production Decreasing productivity % decline 5 month strike in the platinum industry - $23 billion loss of revenue Regulatory uncertainty (MPRDA, carbon tax, energy policy, etc.) 4

5 1. The Mining Sector in South Africa 2. Anglo American and Electricity 3. SA s Energy Future 4. The Way Forward SECURITY CLASSIFICATION

6 A GLOBAL PLAYER Headquartered in London with 12 corporate and representative offices Key Headquarters Corporate & representative offices Iron Ore and Manganese Metallurgical Coal Thermal Coal Copper Nickel Niobium and Phosphates Platinum Diamonds 6

7 ELECTRICITY IN OUR BUSINESS Consistent and reliable supply is critical for our business. Electricity is used to ventilate our deep underground mines and to pump water out of the mines to prevent flooding Anglo American s average demand is 850 MW Peak demand is roughly 1250 MW Relative consumption by business unit: Anglo American BU Consumption as proportion of total Platinum 77% Coal 12% Kumba 7% De Beers 3% 7

8 POWER CONSTRAINTS Mines curtail load by 10 20% as required by Eskom 12 curtailment events in 2015 year-to-date Uncertainty in when future curtailments will take place, the duration and %load that we will be required to reduce, make it difficult to plan to prevent production losses Safety is always a priority 8

9 ELECTRICITY COSTS One of many increasing input costs rising above inflation EXAMPLE: In 2011, electricity accounted for approximately 3% of Coal South Africa s operational cost. In 2014, that went up to 8% * Electricity increases in the range of 10% to 15% * Diesel increase of around 12% year-on-year post

10 1. The Mining Sector in South Africa 2. Anglo American and Electricity 3. SA s Energy Future 4. The Way Forward

11 COAL WILL CONTINUE TO BE A PART OF OUR FUTURE Current national policy confirms coal scontinuing significant contribution The IRP2010buildplan suggeststhat coalwill still contribute 65% of SA s electricitymix by 2030 Certainty needed on the new supply options and who will be responsible for them. Baseload Coal IPP request for proposals released 15 December 2014 Total additional new capacity (without committed) until 2030 in GW Committed new builds Existing fleet (2010) Policy-adjusted IRP 15% 23% 6% 6% 9% Subjectto later revision Binding Import Coal Nuclear Hydro Gas - CCGT Peak - OCGT Share of 42% total new GW Renewables Solar PV CSP Wind Energy share In 2010 In 2030 =260 TWh =454 TWh 90% 5% 5% 0% <0.1% 0% 65% 20% 5% 1% <0.1% 9% Source: IRP

12 COAL SUPPLY CLIFF New mines are urgently required to supply existing and new coal-fired power stations Eskom 40-year plan shows approximately 2 billion tons needs to be secured in the long term 22 Mtpa will be sourced from new coal supply agreements over the next decade Major new mine development is required to meet Eskom s demand Source: Eskom presentation by Vusi Mboweni at McCloskey 2015 EXTERNAL 12

13 PARTICIPANTS IN SA COAL ROADMAP Administrative and secretarial support Controlling finances/ technical input Technical analysis and project management SA Coal Roadmap July

14 SCENARIOS: THE FRAMEWORK High global response to climate change Lags Behind Low Carbon World Low local response to climate change World pushes ahead with emissions mitigation, SA pursues coal as its primary energy source More of the same Limited action taken on emissions mitigation globally and in SA Strong action is taken globally and locally on emissions mitigation At the forefront SA joins global leaders in emissions mitigation, much of the remainder of the world takes limited action High local response to climate change Low global response to climate change SA Coal Roadmap July

15 RESULTS FROM SCENARIO ANALYSES: ELECTRICITY BUILD PLAN SA will need between 85,000 and 125,000 MW installed capacity by 2040, up from 42,000 MW in 2010 Over 35,000 MW more installed capacity required in high renewables/nuclear scenarios due to lower load factor of renewables Note: Build plan follows IRP 2010 until 2030 and then own projections to 2040 Many existing power stations will be closed between 2030 and New build is required to replace this retiring capacity and to meet demand growth SA Coal Roadmap July

16 RESULTS FROM SCENARIO ANALYSES: UTILITY COAL SUPPLY Central Basin Supply from Waterberg coalfield climbs with new power stations opened ( Lags Behind and More of the Same ), and meeting Central Basin needs More coal may be required from Waterberg if all projects in Central Basin are not developed on time or the coal is exported Early planning required to prevent supply constraints Offers opportunities for transformation Integrated urban planning required in region Waterberg Supply from Central Basin coalfields declines as existing power stations close Highlights need for closure planning SA Coal Roadmap July

17 SA COAL ROADMAP MODEL RESULTS SA cannot afford early retirement of existing power stations SA will need between 85,000 and 125,000MW of installed capacity by 2040 (42,000MW in 2010) Investment in generation capacity and grid infrastructure is needed. An opportunity exists for the private sector to shoulder some of the risk and cost through smaller independent power projects (IPPs) which will incrementally increase capacity in a shorter timeframe Coal supply from the Central (Witbank) Basin will start to deplete in the 2020 s To prevent supply constraints, necessary Waterberg infrastructure is therefore required well in advance. Ambiguity around policy and regulation pertaining to these investments must be resolved Source: South African Coal Road Map 17

18 1. The Mining Sector in South Africa 2. Anglo American and Electricity 3. SA s Energy Future 4. The Way Forward

19 THE WAY FORWARD Mining industry is under pressure and there is strong competition for capital Investors have lost confidence in South Africa to build it again, we need to: Speed up processes for - and secure - continued supply of coal to Eskom Invest in infrastructure to open up the Waterberg as a matter of urgency Provide clarity on Plan B (or C or D) in the event that IRP build programme is not met Accelerate the baseload IPP programme and get all available supply onto the grid Develop a flexible market to allow this to happen Create a regulatory/ policy environment that provides certainty and an enabling environment for investment Make the decisions and stick to them! 19

20 THANK YOU