JOHANNESBURG (miningweekly.com) – The banking sector has a crucial role to play in enabling mining companies to transition to clean energy fully, says Nedbank Corporate and Investment Banking (CIB) principal for sustainable finance solutions Telvina Naidoo.

“Innovative funding structures and sustainable-finance solutions can help make the transition more feasible,” Naidoo states in an Op-Ed to Mining Weekly.

Nedbank CIB partnered with Harmony Gold in the refinancing and upsizing of the JSE-listed gold mining company's key corporate debt facilities. This was done through a R10-billion sustainable-finance debt package that included a green loan and a combination of sustainability-linked credit facilities with indicators and targets aimed at reducing Harmony's carbon footprint and water usage. The green loan will finance the second phase of Harmony's solar photovoltaic (PV) renewable-energy capacity by 137 MWp. 

The bank also partnered with mineral sands mining company Tronox to conclude R3.1-billion in debt funding for two 100 MW solar PV projects for the supply of solar power to five Tronox facilities through wheeling arrangements with Eskom. The solar plants will deliver up to 40% of Tronox's South African power requirements and reduce its carbon emissions by an estimated 13%.

The three factors that Naidoo highlights as key drivers of renewable private power generation in mining are:

• the urgent imperative for mining companies to meet their carbon emissions reduction targets;
• the need for mines to ensure electricity reliability; and
• the affordability and price predictability that self-generation provides.

Incentivising the transition is the recently introduced 125% tax rebate on the project cost of renewable energy installations in the first year of the project investment.

While the more conducive regulatory environment has extended self-generation considerably, it has not yet led to mines being able to declare complete energy independence, with load curtailment still being a negative necessity that lowers output.

However, available to provide clean power during national grid power outages is battery storage, which Naidoo highlights as an effective solution to counter unreliable electricity supply.

While a combination of renewable energy generation and battery storage is being considered and adopted by mining companies with large operations, the full transition to clean energy is seen as being some way off, with financial and logistical hurdles associated with it still needing to be scaled.

“The banking sector has a crucial role to play in enabling mining companies to overcome these obstacles and make the necessary investments in renewable energy. Innovative funding structures and sustainable-finance solutions can help make the transition more feasible for mining companies,” says Naidoo.