Harmony Gold in talks to build solar power plant

South African miner Harmony Gold is in talks to build a 30 megawatt solar power plant in the Free State province to supply power to some of its operations to try to reduce power costs and dependence on struggling utility Eskom.

Eskom, which produces over 90 percent of South Africa’s electricity, is saddled with more than $30 billion in debt and has had to impose some of the country’s worst power cuts in years over the past few days.

Eskom’s troubles are a big headache for heavy energy users in South Africa, particularly gold mining companies.

“Our Eskom bill is massive. To replace Eskom would be a fallacy, we won’t be able to do that. We can however, where we have long term projects, we can start building solar plants,” Harmony CEO Peter Steenkamp said.

Harmony said it was in talks with the state energy regulator over a licence to build a solar power plant in Welkom in the Free State province.

“We have gone through the procurement process and we have now managed to bed down a developer and an investor in a 30 megawatt facility in Welkom which will relieve some of our dependence on Eskom,” Melanie Naidoo-Vermaak, executive for sustainable development at Harmony, said.

The company, which uses around 280 megawatts of power at its South African operations, plans to use the solar plant to help to supply its longer life assets including its Tshepong operations in the Free State.

Harmony said it had also taken action to reduce consumption during peak periods and improved efficiency of pumping operations.

Eskom said last week it was requesting steeper electricity tariff increases from the energy regulator of 17.1 percent in 2019/20, 15.4 percent in 2020/21 and 15.5 percent in 2021/22.

The utility also implemented a third day of planned power cuts on Tuesday because of a shortage of generating capacity.

“That will change cut-offs, that will change life of mines that will have an impact on jobs if Eskom continues with the very high increases,” Harmony CEO Steenkamp said.

Harmony also reported a 94 percent drop in first-half profit on Tuesday on the back of higher costs and depreciation, and a weaker rand, even though gold production rose 34 percent to 751,008 ounces.

By 1215 GMT shares in Harmony were up 3.45 percent to 30.28 rand on the back of a robust operational performance.

“They had a number of acquisitions which they had done in the previous financial year that had one off items which impacted their profitability but from an operational point of view the business has done considerably well,” Paul Chakaduka, a trader at investment firm Global Trader.

Harmony, which has 16 percent of its costs coming from electricity, said it’s South African operations were also impacted by two months of higher winter electricity tariffs and annual wage increases.

($1 = 13.7990 rand)

(By Tanisha Heiberg; Editing by Subhranshu Sahu and Jane Merriman)