Reunert Limited · JSE:RLO
Reunert — Investor Day (2023)
40 slides from Reunert's investor day presentation, 2023
Slide 1: Renewable Energy
RENEWABLE ENERGY Terry Lawrenson Electrical Engineering Chief Executive Officer
Slide 2: Agenda
AGENDA Key market developments RE ecosystem Embedded generation Energy storage solutions Energy trading / wheeling Load control and managed metering Financial disclosures Closing remarks
Slide 3: Introducing the Speakers
INTRODUCING THE SPEAKERS Terry Lawrenson Grant Berndsen James Verster Jenna Harris Nico de Bruyn Electrical Lumika Group Blue Nova Chief Apollo Africa Renewable Engineering Chief Executive Executive Officer Chief Executive Chief Executive Energy Chief Officer 25 years executive Officer Officer 25 ye
Slide 4: Key Market Developments
KEY MARKET DEVELOPMENTS Terry Lawrenson Electrical Engineering Chief Executive Officer
Slide 5: Key Market Developments: Economy and South Africa
KEY MARKET DEVELOPMENTS| ECONOMY Persistently high global inflation and interest rates > Affects projects viability through debt competitiveness and long-term price volatility Global supply chain constraints post Covid-19 > Remain dynamic as supply chains normalize post Covid-19 KEY MARKET DEVELOPME
Slide 6: Key Market Developments: South Africa
KEY MARKET DEVELOPMENTS| SOUTH AFRICA 2. Loadshedding acceleration > Has had the effect of changing the price comparison from “RE against Eskom” to “RE against diesel” − a significant boost for all RE solutions > Contributed to additional market opportunity and competition > Complicated technical an
Slide 7: Key Market Developments: Our view of the renewables market
KEY MARKET DEVELOPMENTS| SOUTH AFRICA Our view of the overall renewable’s market > Significant growth into the medium to longer term > Solar will be the default choice of solution to substitute historical generation: − Quickest and cheapest to deploy − Less geographically/grid limited − But introduc
Slide 8: Renewable Energy (RE) Ecosystem
RENEWABLE ENERGY (RE) ECOSYSTEM Terry Lawrenson Electrical Engineering Chief Executive Officer
Slide 9: The End-to-End RE Eco-System
THE END-TO-END “RE ECO-SYSTEM” Supply side Embedded generation ○ Storage ○ Load control ○ Wheeling Enabling IoT, software and data (“platforms”) Financial instruments (RECs, carbon, etc) Apollo Marketplace Transmission Generation Grid-Interactive Buildings (CBi: energy Platform) Distribution Storage
Slide 10: Reunert Renewables: Leading Technical and Commercial Converged Renewable Energy Solutions
REUNERT RENEWABLES | LEADING TECHNICAL AND COMMERCIAL CONVERGED RENEWABLE ENERGY SOLUTIONS Benefits to customers > Complete offering and expertise > Tailored and optimised solutions (rather than scope what you have to offer) > Developing the technology towards integrated and validated Smart Energy R
Slide 11: Our Unique Offering Across the Renewable Energy Ecosystem
OUR UNIQUE OFFERING ACROSS THE RENEWABLE ENERGY ECOSYSTEM Utility Scale (REIPP)1 Electrical Load Control and Automation Engineer, Procure and Construct (EPC) Build Own Operate and Maintain (BOO) Assets Embedded Generation Backup Off Grid Storage Grid Stabilisation Arbitrage & Peak Shaving Energy Tra
Slide 12: Embedded Generation
EMBEDDED GENERATION Grant Berndsen Lumika Group Chief Executive Officer
Slide 13: C&I Embedded Generation Market Size and Growth Considerations
C&I EMBEDDED GENERATION MARKET SIZE AND GROWTH CONSIDERATIONS Considerations on market size and growth > Challenging to get exact data on market size > Estimates from the South African Photovoltaic Industry Association, news, social media, etc, puts Terra Firma Solutions (TFS) at a leading position
Slide 14: Reunert's Embedded Generation Target
REUNERT’S EMBEDDED GENERATION TARGET installations C&I solar installation Grid scale solar farm Residential and SMME solar ˃Very small installations, ˃ Smaller installations, ˃ Very large installations, typically < 250kW typically between 500kW to typically > 50MW ˃Embedded generation 50MW ˃ Remote
Slide 15: Reunert's Business Model
REUNERT’S BUSINESS MODEL > Terra Firma Solutions (TFS) the operating arm of the Lumika Group is a leading SA C&I solar EPC − Early mover in the industry and well-respected − Recognised technical, financial and legal competence − Established funding relationships, high trust > Our capabilities in the
Slide 16: Addressing the Embedded Generation Market
ADDRESSING THE EMBEDDED GENERATION MARKET > Scaling of company − Appointed new leadership − Recruited key skills that will enable the company to accelerate growth − Deploying new technology to sites i.e. cleaning robots − Updating business processes to cope with increased volumes − Operating a lean
Slide 17: APMC & Reunert Partnership | Lumika
APMC & REUNERT PARTNERSHIP| LUMIKA > Partners that share commitment to: − Values − Ethical business − ESG A.P. Moller Capital P/S > AP Moller Capital brings deep relationships with international funding Founded in 2017 and regulated by the Danish Financial Supervision and capital providers Authority
Slide 18: Energy Storage Solutions
ENERGY STORAGE SOLUTIONS James Verster Blue Nova Chief Executive Officer
Slide 19: Battery Market in South Africa Is on an Extreme Growth Trajectory
BATTERY MARKET IN SOUTH AFRICA IS ON AN EXTREME GROWTH TRAJECTORY General market dynamics > R12bn of battery imports in 2022, up 300% from 2021 and continuing its trajectory in 2023* > The imports are so significant that it is impacting SA’s balance of payments* > The overwhelming majority of batter
Slide 20: Reunert's Growth Aspirations
REUNERT’S GROWTH ASPIRATIONS Battery business ………………………….. RE Business Retail/wholesale ……………………….. Custom designs High Stock ……………………………….. Project based Highly competitive ………….…………Less Competitive
Slide 21: Addressing the Storage Market
ADDRESSING THE STORAGE MARKET > Reunert’s focus > Focus is applied in areas that require local value add, typically in the larger product ranges such as: − High voltage solutions − High current solutions − Intelligent energy storage systems − Battery management systems and energy management systems
Slide 22: Progress to Date
PROGRESS TO DATE Progress over the past 12 months: > Built and moved into new facility in Somerset West which enables production revenue in excess of R1bn per year; > New facility assisted with the developed increase operational efficiencies > Continued updating of business processes > Acquired new
Slide 23: Energy Trading / Wheeling
ENERGY TRADING / WHEELING Jenna Harris Apollo Africa Chief Executive Officer
Slide 24: The Market Opportunity
THE MARKET OPPORTUNITY Eskom and municipal electricity market size: ~R260 billion/year Energy Intensive Users Group : Everyone 40% Else: 60% Exxaro Arcelor Mittal Sasol Anglo Harmony Sibanye Hulamin 3,5 times the revenue Samancor 180 000 generation as the South RBM GWh/yr* African Gold Market Glenco
Slide 25: How Does Wheeling Work?
HOW DOES WHEELING WORK? ˃ Power is injected into the Eskom grid ˃ We notify Eskom of where that power is to be allocated through a wheeling nomination. Eskom Grid ˃ Eskom provides a credit onto our customer’s bill for our wheeled supply. ˃ The customer gets a separate invoice from Renewable Eskom Ba
Slide 26: Customer Product Benefits
CUSTOMER PRODUCT BENEFITS ˃ The differentials between the Eskom wholesale price and new renewables CUSTOMER SAVINGS FORECAST prices enables us to offer price R250 000 000 competitive supply to customers R200 000 000 which are escalated by CPI increases ˃ Our product designs are optimised R150 000 00
Slide 27: Markets and Product Maturity
MARKETS AND PRODUCT MATURITY ELECTRICITY MARKETS CUSTOMER TYPE PRODUCTS Retail Product Eskom connected generator to Eskom Large Power User For customers customer > 0.5 MVA 0.5MW - 10MW MATURITY Wholesale Product Eskom connected generator to Seasonal/ Variable Users For customers munic customer >10 M
Slide 28: Policy / Regulatory Challenges & Opportunities
POLICY / REGULATORY CHALLENGES & OPPORTUNITIES INHIBITORS GAME CHANGING OPPORTUNITIES ˃ Municipal Debt ˃ Virtual Wheeling Framework ˃ NRS loadshedding Framework ˃ Eskom Open Market ˃ Municipal deposits RISKS Tariff restructure Policy/ Regulatory Change The regulatory environment, policies and proced
Slide 29: Load Control and Managed Metering
LOAD CONTROL AND MANAGED METERING Terry Lawrenson Electrical Engineering Chief Executive Officer
Slide 30: Load Control and Managed Metering
LOAD CONTROL AND MANAGED METERING Grid-interactive buildings 1. Grid-interactive buildings have a holistically optimised blend of energy efficiency, energy storage, renewable energy, and load flexibility technologies enabled through smart controls 2. This results in a lower, “flatter,” more flexible
Slide 31: Principle Markets and Reunert's Focus
PRINCIPLE MARKETS AND REUNERT’S FOCUS Demand side management (DSM) but under the control of the user 1. Users optimise or eliminate energy costs and penalties by managing maximum demand, peak tariff times and unnecessary loads 2. Any user with a time-of-use tariff will benefit anything from 10% to 2
Slide 32: Financial Disclosures
FINANCIAL DISCLOSURES Nico de Bruyn Renewable Energy Chief Financial and Business Improvement Officer
Slide 33: Two Business Archetypes with Different Profit, Cash and Risk Profiles
TWO BUSINESS ARCHITYPES WITH DISTINCTLY DIFFERENT PROFIT, CASH AND RISK PROFILES Traditional project and product business Investment based annuity business (EPC on product sales) (Solar assets) Long term Investment Repeat Quick Sustainable Capital Investment Structure – business Investment predictab
Slide 34: Building a Portfolio of Power Purchase Agreements in Ringfenced Asset Companies
BUILDING A PORTFOLIO OF POWER PURCHASE AGREEMENTS IN RINGFENCED ASSET HOLDING COMPANIES WITHIN LUMIKA GROUP THAT WILL DELIVER ATTRACTIVE LONGER-TERM RETURNS Sustainable Geared IRR USD100m 50/50 JV 485MW 5 – 7 years returns > Risk (Total) adjusted WACC Delivering sustainable predictable cashflows int
Slide 35: Asset Holding Companies Structured to Mitigate Risk
ASSET HOLDING COMPANIES STRUCTURED TO MITIGATE RISK AND SECURE OUR INVESTMENT Asset companies > Investments are structured in special purpose vehicles known as “asset companies” within Lumika Renewables and TerraFirma Solutions > These asset companies can be either full subsidiaries or joint venture
Slide 36: Asset Holding Companies Comprise a Portfolio of PPAs
ASSET HOLDING COMPANIES COMPRISE A PORTFOLIO OF POWER PURCHASE AGREEMENTS DESIGNED TO DELIVER RISK MITIGATED LONG TERM SUSTAINABLE RETURNS Well established engineering, 15 – 25 Year PPAs procurement, Bankable off-takers construction and maintenance capabilities Generation guarantees Consumption guar
Slide 37: Structured Multi-Level Governance Process for PPA Portfolio
APPLYING OUR STRUCTURED MULTI-LEVEL GOVERNANCE PROCESS, ENSURE WE BUILD A PORTFOLIO OF PPAS THAT WILL DELIVER LONG TERM SUSTAINABLE RETURNS IN EXCESS OF OUR RISK ADJUSTED COST OF CAPITAL Industry We understand and deal with the typical risk Portfolio elements embedded in each of the elements to the
Slide 38: A Typical 1MW Site Delivers Positive Cash Returns
A TYPICAL 1MW SITE DELIVERS POSITIVE CASH RETURNS OVER THE ENTIRE PROJECT LIFE Cumulative Cash Profile R50 000 000 R40 000 000 R30 000 000 R20 000 000 R10 000 000 R0 T0 T1 T2 T3 T4 T5 T6 T7 T8 T9 T10 T11 T12 T13 T14 T15 T16 T17 T18 T19 T20 -R10 000 000 Cash attributable to Shareholders Tax Paid Debt
Slide 39: Additional Disclosures to Evaluate Reunert's RE Assets
ADDITIONAL DISCLOSURES TO EVALUATE REUNERT’S RE ASSETS 1. The investments undertaken are long term (15 – 25 years) 2. Returns from these investments will not be immediately visible since the investment cycle is on average 5 years 3. The following key disclosures will be provided, commencing with FY2
Slide 40: Q&A, Contact Us
Q&A Key upcoming dates Contact Us > Full-year results 22 November 2023 > Integrated Report 20 December 2023 karens@reunert.co.za