Energy Partners’ Post

Transcript

Moneyweb now on the Money. This podcast is brought to you by Stanlib Asset Management. Invest in more global opportunities through their partnership with JP Morgan Asset Management. I'm chatting with me to Victory general manager of sustainability at Energy Partners Miller appreciate the term today President Trump once again pulled the US out of the Paris climate agreement also out of the just energy transition partnership. The latter obviously hitting South Africa harder. First question is ESG dead or is it just sort of dead or struggling in America high Simon and thanks a lot for the invite to start with the UG and in our opinion it is definitely not a dead sort of sentiment about. I see the American influence in the American withdrawal from the South African Total International just energy transition pledges is definitely impacting it. But the evolution of HG is sort of moving from the surface level sustainability commitments to a more pragmatic commercially LED approaches to climate action. So what we see is Energy Partners is really a lesson surround these last 8-17 years in the industry is that we the clients are moving beyond that broad EG type into a targeted impact driven. Initiatives and what we call moving of the needle. So true sustainability if we can put it that I take your point, true sustainability and you're cementing commercial there, which is in a sense maybe the pattern is changing rather than ESG over sort of business taking more valid rather than government, particularly with the current political uncertainty. Absolutely the private sector and the businesses are not relying on governance anymore and those government LED initiatives are in essence only limited to the extent that they can reach in terms of the funding and in terms of the exposure. The international communities and markets and the businesses want to create their own independence and in their own sort of resilience and the competitiveness. So they shift sort of the market in a way of changing the shape of your G by increasing investments in the on site renewable energy solutions, energy efficiency measures, alternative financing strategies. And they seek that carbon footprint reduction together with what we called a sustainability banked. So it has to kind of have both ways the sort of environmental impact reduction. And also the operational cost reduction with the true business case, how does it work? You know, is it going to actually be a return on investment as it is planned? That's a great point. And I've chatted with some CEO's in recent weeks who say, you know what, yes, it's nice not being load shed, but actually it's also financially viable. And this has been happening. I mean, as I mentioned, I mean, you know, mine is impact. We're seeing it all over the market where business has been doing this, yes, for the environmental and the renewable energy as well as the commercial. This is a process that's been well in place for a number of years. Absolutely. I mean it's not about taking the boxes, it's about making the financial and operational sense and those energy efficiency upgrades and long term cost savings initiatives essentially build the differentiation for the businesses. They then compared to their peers see who is leading the way in terms of the amount of sell appliance, amount of the lower energy intensity and that leading of the ways shown in that commercial sense. Definitely in the market there's a brand reputation as well. Is there almost the risk now perhaps is it not doing anything other words in standing still you're going to be overtaken. You're going to pay more for your power, fire Escom and you're going to have lower ESG credentials. Doing nothing is just not an option really. Absolutely. All the risk for businesses is kind of delaying the process and being in that inaction mode because then they risk a higher energy costs, supply chain disruptions, exposure to the carbon taxes, and that's also increasing in terms of the global markets and the tightening of the regulations. They can essentially avoid all of these generators, all of the uncertainty, the hikes of the costs by actually just creating their own. Independence ecosystem and building that on premises, resilience by themselves with the various technologies. I mean what we see, you know, it's not just about carbon reduction, but also energy intensity reduction, neutrality. The goals that they have is to actually create. There are some technologies would create almost like a combination of various LED lights, retrofits, more automation, building management systems are creating that almost like an AC island and a creation of their own kind of grid microgrid on their premises so that they can control the assets. As well in that way, so to almost operate in the lower cost when the rates are in the off peak rates or you know because the generator kind of presence created a lot of uncertainty and the cost came to seven or eight times more than the grid rates. So avoiding all of these things essentially creates an operational strength for the business. Yeah, it's more than just being off grid. It's actually about being efficient with your power usage and renewable is but a part of that. My senses, and you will correct me if I'm wrong, is that certainly in South Africa we've largely got the regulatory environment which enables this. Absolutely, the nurse enables the national energy regulator for South Africa and enables the registration of these renewable energy plants, ESCOM as well. I mean there are now the Wheeling arrangements as well. So there is a potential for the businesses to go through their general channels of the cities, municipalities, the registration of of their solar plants of their renewable sources of power and their battery energy storage system. So everything is in place. So one just needs to create the strategy almost like create overarching sustainability strategy and see what are the steps that they will take. First, holistically, not just you know one initiative or 1 technology, looking at the whole sort of portfolio, especially in the large commercial industrial clients, there is so many aspects to have in mind. And last question and again my sense is, is that the cost pressure in this space has been downward. Either you're getting more bang for your buck or you can get the same for cheaper. I imagine that is the case certainly in the commercial space and probably a continuing trend as well. You know in the commercial space and looking at the hardware that goes into these sort of plants, I mean there is an embedded carbon in that hardware as well. So it's just about transparency and. Population quantification, all of these efforts and costs, but hardware has gone down and the labour in South Africa also, you know, the science and the knowledge that the sort of kind of the strategic knowledge around how to deal with it is also grown over the years. So many of these large businesses is actually opting for the outsource renewable energy with the power purchase agreements. And that is a solution where business can actually completely de stress from the risk from ensuring the yield. I mean, to me the two key reasons for the PA. Ensuring that embedded asset management, operations and maintenance and then experts in the field are actually guaranteeing the plant performance. I mean that is a non negotiable. I mean we've seen so many plants and so many sort of audits that we have done where we see sort of the plant that is going to pay back only in the 19 or 18 years just because no one is maintaining the performance is low. So that is really a key to actually get the money back in these terms. And then the second one is the financial mechanism. You know one company can go across the effective solution without the cash flow needs zero capital and then they can concentrate on their own. This growth and expansion, yeah. And that's a great point. Let them focus on the business and not so much worry about the energy requirements. We leave it there. It's Mercury General Manager, Sustainability at Energy Partners. Appreciate the time. This podcast is brought to you by Stanley Besset Management. Invest in more global opportunities through their partnership with JP Morgan Asset Management.