Managing Energy Risk in Africa

Egmont OttermannCemEnergy Conference, Moscow, 3 December 2014

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Company overview

• Established over 120 years ago

• Listed on the JSE for 104 years

• Largest cement manufacturerwith leading market positions inSA, Zimbabwe, Botswana andRwanda

• Leading burnt lime and dolomiteproducer in southern Africa

• Strong presence in theaggregates industry in Gautengand Botswana.

• Cement is also exported to otherAfrican countries

• For the 2013 financial year:

• Revenue R 8.3 bn

• EBITDA R 2.5 bn

• Operating profit R 1.9 bn

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DRC

Population (m) 74.7

Urbanisation (%) 34%

GDP per capita ($) 241

Cement consumption/capita (kg) 26

Real GDP growth 13 - 18E 9.8%

Capacity (mtpa) 0.68

Cement price per tonne ($) 400

Botswana

Population (m) 2.1

Urbanisation (%) 24%

GDP per capita ($) 7,471

Cement consumption/capita (kg) 302

Real GDP growth 13 - 18E 4.9%

Capacity (mtpa) -

Cement price per tonne ($) 120-170

South Africa

Population (m) 51.1

Urbanisation (%) 62%

GDP per capita ($) 6,847

Cement consumption/capita (kg) 226

Real GDP growth 13 - 18E 3.7%

Capacity (mtpa) 16

Cement price per tonne ($) 110-150

Mozambique

Population (m) 22.5

Urbanisation (%) 31%

GDP per capita ($) 640

Cement consumption/capita (kg) 68

Real GDP growth 13 - 18E 9.7%

Capacity (mtpa) 1

Cement price per tonne ($) 130-240

Zimbabwe

Population (m) 13.0

Urbanisation (%) 29%

GDP per capita ($) 799

Cement consumption/capita (kg) 76

Real GDP growth 13 - 18E 4.9%

Capacity (mtpa) 1.5

Cement price per tonne ($) 180

Rwanda

Population (m) 10.4

Urbanisation (%) 17%

GDP per capita ($) 724

Cement consumption/capita (kg) 37

Real GDP growth 13 - 18E 8.6%

Capacity (mtpa) 0.2

Cement price per tonne ($) 250-350

Ethiopia

Population (m) 86.8

Urbanisation (%) 17%

GDP per capita ($) 533

Cement consumption/capita (kg) 74

Real GDP growth 13 - 18E 8.7%

Capacity (mtpa) 9

Cement price per tonne ($) 130

Source: Cemnet 2012, IMF data

Algeria

Population (m) 37.5

Urbanisation (%) 72%

GDP per capita ($) 5,668

Cement consumption/capita (kg) 549

Real GDP growth 13 - 18E 4.3%

Capacity (mtpa) 22

Cement price per tonne ($) 80-120

PPC’s expansion strategy

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Richards Bay Coal Price Index

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South African Coal Market

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PPC Strategy

• Operational Efficiency• Reducing our energy usage though improved efficiency and

technology upgrades

• Alternative Energy

• Alternative Fuels

• Captive Electrical Energy

• Strategic Procurement• Improving the flexibility of plants for use of fuels

Operational Efficiency Alternative Energy Strategic Procurement

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Volatility

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Energy Management Systems (ISO 50001)

• Sets Management Focus

• Overall Management

• Operations

• Procurement

• Design

• Training

• Reviews

• Captive Energy Options

• Awareness

• Must have for effective energy risk mitigation

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Pre-Calciner

Main Burner

Liquids and Fine Solids

Via Raw Mill

Non-Carbon Materials

• Foundry Sand• Slag• Ash• Mine Sand• Gas Cleaning

Waste

Liquid Waste < 3000 cP•Impregnated Sawdust•Filter Cakes•Fine Plastics•Paint Powders•Carbon Black•Dried Sewage Sludge

•Bulk Solids <50 mm / Sludge•Paper Waste•Mixed Shredded Waste•Plastics•Dog Food and Maize Seed•Spent Pot Liner

Kiln Back End - Lump Fuels•Tyres•Controlled Substances•Pharmaceutical Waste•Packaged Sludges

Alternative Fuels

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South African Focus

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Carbon Tax - SA

• Current and Proposed Instruments

• Carbon Tax Budget Discussion Paper

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Carb

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Basic

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Basic Price

Tax Design

Basic Trade Process Off Set

Cement 60% <10% <10% <5%

Basic Allocation Adjustment

Ajd = Basic*(Eff/Bench)-Basic

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Renewable Energy

• Wind

• Innowind, subsidiary of EDF EN (www.edf-energies-nouvelles.com)

• Two Linked Wind Projects (60 MW for RDF Round 2 and 21 MW for PPC)

• PPC purchases 50 000 MWh at positive NPV vs ESKOM over 20 years

• Achieves target of 10% Renewable Energy

• Solar PV

• Solar PV project prices have fallen to between R15 Mio and R20 Mio per MW

• Structured Rollout

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Women sort coffee beans in Addis Ababa, Ethiopia

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Chitungwisa Market, Harare, Zimbabwe

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Skyline of Kinshasa, Democratic Republic of the Congo

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PPC Zimbabwe

• Fifth consecutive year of rising cement demand

• Slower domestic volume growth due to on-going liquidity challenges and high external debt levels

• Good export volume growth and selling prices achieved

• Improving margins as costs well maintained

• Modernisation programme

• Bulawayo plant –commissioned country’s first cement bag palletiser and a new bulk loading facility

• Colleen Bawn plant – successful crusher and kiln upgrades led to improved reliability and output

• United Nations Development Programme estimates the need for investment of some $18 billion to rehabilitate and modernise infrastructure

• We are optimistic about growth in infrastructure investment

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New CIMERWA plant in Rwanda to be commissioned in 2015

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Summary

• Know and understand the power an fuel requirements of the plant.

• When developing solutions, starting from a blank sheet is critical.

• Understand the limits to the bankability of the project.

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Energy and Climate ChangeA Tale of Winners and Losers

What will you be?

Lord AN Onymous looks back from 2050

Conclusion

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Questions?