Exxaro says it will retain its dividend policy and that many companies are in preservation of capital mode in a changing world. Photo: Supplied
Exxaro says it will retain its dividend policy and that many companies are in preservation of capital mode in a changing world. Photo: Supplied

Exxaro narrows focus to explore energy security to ensure appropriate returns

By Dineo Faku Time of article published May 29, 2020

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JOHANNESBURG – Exxaro Resources, the JSE-listed diversified mining company, told shareholders at its annual general meeting on Tuesday it would continue with its strategy to diversify into the energy security sector and would ensure appropriate returns.

Exxaro, Eskom’s biggest coal supplier, was under the spotlight as shareholders wanted to know how the company was managing greenhouse gas emissions.

Shareholder Asief Mohamed wanted to know whether board members had considered investing or developing technology that reduced carbon emissions from coal significantly.

“Is this (investing in technology) not a better use of capital allocation for Exxaro because it will take the pressure off carbon emissions and at the same time it will result in a viable solution that will yield viable returns?” asked Mohamed.

Exxaro chairman, Jeff van Rooyen, said the company began exploring opportunities in food security, water security and energy security through the Business of Tomorrow (BoT) strategy adopted in 2017. However, Exxaro had since narrowed its focus to energy security, said Van Rooyen.

He said, “There is certainly scope for us to look at technology, but it will be technology which is related to energy security not outside energy security. As you know as far as our coal business is concerned we have used technology to enhance efficiency and profitability. We are not under any kind of short-term pressure. 

“As we diversify into the energy security space, we will ensure we get the appropriate returns on the investment we are making. We communicated this to the market even before Covid-19. Now that we are in this situation which is unprecedented, we plan to continue with our strategy even more cautiously,” said Van Rooyen.

In a bid to gain nearer-term traction in energy security, Exxaro purchased the remaining 50 percent interest in Cennergi, a southern African-based diversified Independent Power Producer, from Tata Power last year.

Mohamed also wanted to know whether the company had considered increasing the dividend yield for shareholders.

“If we don’t have any viable opportunities to invest in growth, should the money not be returned to shareholders?“ asked Mohamed. 

In his response, Van Rooyen said the company would retain its dividend policy. 

“The world has clearly changed substantially in the last few months due to the Covid-19 pandemic. When you look across the corporate landscape, a lot of companies are in a preservation of  capital mode. For that reason my sense is that we will maintain the dividend policy that we have introduced in the last year or two. 

"I do not think there is scope for us to do more than that. I think it is important for us to have an appropriate capital buffer,” said Van Rooyen.

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