This document summarizes PPC Ltd's strategy for managing energy risks in Africa given the energy intensive nature of cement production and volatility of energy prices. PPC has operations in South Africa, Zimbabwe, Botswana, Rwanda, Ethiopia, and DRC. The strategy involves improving energy efficiency, generating their own renewable power through projects like wind and solar, and developing alternative fuels. In countries with electricity shortages like Zimbabwe, the focus is on a mix of renewables and waste heat recovery. In Rwanda, peat and imported coal are used but developing alternative power is critical given the country's limited domestic energy resources and PPC's large electricity needs. Bankability of energy projects is also an important consideration.

1. Managing Energy Risks in Africa
Egmont Ottermann, Group Energy Manager, PPC Ltd
Cemenergy Conference, Moscow, Russia, 3-4 December 2014
Dear Conference Organizers, Ladies and Gentlemen
It is truly a pleasure to have been invited to this conference in your beautiful country. Russia has
held a fascination for me over many years. Your rich cultural history, your role as a central power
in European politics, over many centuries, and the vastness and beauty of the country have always
fascinated me.
PPC LTD is a truly African cement company. As one of the oldest continuously operating cement
companies in the world. Last year, PPC celebrated 12 decades of innovation as the leading cement
producer in southern Africa. For over a century, PPC has tracked the growth and development of
South Africa and Zimbabwe, producing cement for many of these countries’ iconic landmarks.
Today we are an expanding building materials enterprise, based in South Africa, with operations in
Zimbabwe, Botswana, Rwanda and with projects under construction in Ethiopia and the DRC. Our
current operations have a manufacturing capacity of 8 million tons of cement. PPC also produces
aggregates, metallurgical-grade lime, burnt dolomite and limestone. Our Mooiplaas aggregates
quarry in Gauteng has the largest production capacity in South Africa. We also own the largest
lime plant in the Southern Hemisphere, at Lime Acres in the Northern Cape.
As you all know, cement is an energy intensive business. Coal and grid electricity have always
been the mainstay for PPC. In South Africa coal has always been cheap and plentiful, with coal
base electricity supply focused on a large minerals beneficiation complex dependent on cheap
electricity.
However a few planning challenges in our national utility, ESKOM, changed this. In 2008, as
construction work for the 2010 Soccer World Cup was at its height, the lights went out. ESKOM
suffered a massive outage at a few plants due to wet coal and long term poor maintenance. Luckily
we were protected from load shedding due to the need for cement in the construction for the
Soccer World Cup. However we were rudely awakened by a realization that energy costs would
rise steeply over the following years, and that electricity security was not a given any longer.
Together with that came the pre-crash oil spike, with oil going to $148 per barrel and coal
following the trend. The international coal price at the Richards Bay Terminal rose to over $140
per ton and our long term coal suppliers all bought themselves out of their supply contracts to
focus on the export market. We saw a doubling of our coal price in a matter of six months, albeit
from a very low base. Nevertheless these two situations came as a massive shock to the company.
Rudely awakened by this we decided we need to take a hard look at our energy security and the

2. associated risks.
To give you an idea of the challenge, although we had always managed our coal consumption
carefully, we had done very little in terms of electricity. We did not even have our own incoming
power meters, so we could not even check the meters of the utility, save determine the energy
performance of our own equipment.
So we set about developing a strategy to reduce our energy risk, but we quickly realized that
energy efficiency alone, although important and the quickest way to save money, was not enough.
Sure, energy monitoring, establishing energy management systems and developing strategies for
each plant are important, but without self-generation our long term exposure to energy price
volatility could not be mitigated.
Let me pause here and talk a bit about energy price volatility. It is not rising energy cost that is
killing business and industry around the world, but volatility. This is also what leads to energy
shortages and the lack of development in alternatives.
The current drop in oil and coal prices is a perfect example. Whatever the reasons for the drop in
oil prices may be, and there are many, the current drop is causing a storm in the renewables
industry. After the spike in 2008, and the consequent drop after the financial crash, the oil price
rose again and stabilized between $100 and $120 per barrel. This created a measure of price
stability for 5 years that allowed the developers of alternatives to thrive. These days it is not
uncommon to read about the commercialization of biological alternatives to oil, the development
of new renewables technologies like the gasification of waste to biofuels and electrical alternatives.
Also the development of tight oil and gas has this relative stability to thank. However this recent
drop in the oil and coal prices are not making the world an uncertain place again, taking the oil
price below the cost of production for many of the large oil producers, as these have to use the
revenue from oil to subsidize their economies.
Anyway, back to PPC.
So we embarked on a long term strategy to become more efficient, generate our own power and
also develop alternative fuels, which had been investigated off and on for ling, but had never been
profitable due to the low cost of coal.
We started with efficiency, as previously stated. This is the base from where you have to start. The
development of a well thought out and structured energy management system is the first, and most
crucial, step to addressing energy risk. A well-developed energy management system, according to
ISO 50001, gives you a framework for integrating energy into the DNA of a company.
In South Africa, PPC has been involved with the ISO 50001 development process under the
leadership of UNIDO, and I believe Russia is also one of the countries that are participating.
Alternative Fuels in South Africa
Even now, with coal costs of lower than $50 per ton, delivered to the plants in SA, alternative

3. fuels only make sense in a few cases where the customer has a large problem with a hazardous
waste and is prepared to pay for a processing solution. So I am sorry to disappoint, but AFR in
South Africa is not yet a commercial reality. However the situation is changing, and rapidly filling
landfill sites, together with increasingly strict environmental legislation and improved
enforcement, is driving the alternative fuels agenda, but it is not a money spinner, but rather a long
term strategy to get away from coal to more renewable fuels.
To enable this we have developed a long term strategy for each plant, taking into account the
available AFR resources around the plant and the limitations of the process. This strategy includes
the strategic upgrades required to achieve long term independence from coal.
Carbon Tax
Carbon taxation being proposed in South Africa hangs over us like the sword of Damocles.
However if we can step aside and catch the sword, when it falls, we have a powerful weapon in
our hands. This is how I see the threat of carbon tax. Carbon taxation will hit every company, in a
particular industry, and the difference between companies that are successful, and those who fail,
in the future will be those that use the energy, and carbon, limitations they are faced with as an
opportunity rather than a threat, embrace the inevitable, and take as much advantage of the
situation as possible.
Electrical Energy
So what have we done on electrical energy? We decided to take the slow and careful approach,
typical to cement. Electrical energy costs in SA still average around $0.06 per kWh, and therefore
not high enough for captive power generation using renewable technologies, except for a few
examples. However, with electricity costs already double those of 2008, and we expect the price to
double again in nominal terms in the next decade, a South Africa without extensive captive power
is not imaginable. Soon the grid price of electricity will be high enough to make captive renewable
power possible.
The work we have done thus far indicates that this should happen in the next 5 years. In
preparation for this we are developing a captive, renewable, electrical energy strategy for each
operation to prepare it for the implementation of these projects when feasible. We have identified
a captive potential for solar PV at our factories, identified waste heat recovery and captive
biomass power stations that we are developing in a pipeline approach in the next decade.
What we realized is that cement companies have many latent energy assets, they have a lot of land,
they have good mid-size substations with strong grids behind them, they are stable off takers and
they have a lot of waste heat. If the cement plant has an associate quarry it remains behind as a
significant environmental liability. What if we could turn this liability into an energy asset. This
sis what we are doing with the development of energy projects on worked out quarry property,
feeding straight into our grid connected substations.
We are proud to announce that our first engagement in renewable energy, a 60 MW wind farm,
will be complete on one of our quarries in the next few months. Although we do not own the

4. project, we are doing it with an IPP partner and sending the power into the grid as part of South
Africa’s renewables program, this is the first phase of three projects that will eventually generate
210 MW, transforming a long term environmental liability into a productive asset that will
generate power, and income, for the next few decades.
But let me make it clear, we are not in a hurry. There is no sense in competing with anybody on
this. We are in this for the long term and want to make sure that we implement the right energy
solution at the appropriate time when it is financially feasible to do so.
However the situation in our operations on Zimbabwe, DRC and Rwanda is completely different. I
will spend some time on each of these investments and highlight the interesting challenges we are
facing there and how we intend to solve them, depending on if the glass is seen as half empty, or
half full.
Let me say this, we are really excited about this journey we are undertaking into rapidly
developing countries. Working in these countries is exciting, challenging and really gets the
synapses firing. We think our approach is unique, as we are not only investing in those countries to
sell cement. Everything we do in these countries is targeted to doing all we can to promote growth
in the country.
Our message to our hosts is, "We want to help you grow your country" and then grow together
with you.
What is apparent in Sub Saharan Africa is that a lack of development goes hand in hand with
energy poverty. So if we want Host County to grow, we have to make sure there is enough energy
to run the cement plant.
So let us start with our oldest investment, of the three, Zimbabwe.
PPC invested in Zimbabwe through the purchase of Portland Holdings in 2000. For the first few
years it was really difficult as Zimbabwe was going through its troubles, but since dollarization of
the economy things have improved tremendously. We are bullish about Zimbabwean prospects,
simply because we see so much potential in the country, its people and the basic underlying
structures which are mostly still intact. They are still bedeviled by politics, but we see a steady
improvement year on year.
What Zimbabwe has however, is a tremendous electrical energy shortage, combined with a
complete lack of capital and the inability to raise any capital. The state utilities are essentially
bankrupt and everyone is suffering from a network that required 2000 MW, but only supplies 1200
MW. Residential load shedding is a daily regularity and the cement industry is only able to operate
because they are on a, more expensive, guaranteed, tariff that switches everyone else off before
them. But even that does not guarantee grid failures due poor transmission system maintenance.
So how do we become self-sufficient in Zimbabwe? We have a lot of sun, so we could go solar.

5. but that only gives us power during the day. We need to have stability during morning and
afternoon peaks, which are the most risky times in terms of grid overload.
The first is aggressive energy efficiency, then working on a mix of renewables that allow for a bit
of storage. We are currently looking at using solar power and waste heat recovery as a mix to
alleviate the peaks.
Rwanda is an interesting example. We purchased 51% of the local cement company, CIMERWA,
in 2012, when they were in the beginning stages of constructing a new dry process cement kiln.
Up to then they had been operating a small 100 000 ton per day wet cement kiln firing HFO.
The trick in Rwanda is that the country has, except for peat, almost no natural energy resources in
the landlocked country.
The new kiln line will produce 600 000 tons of cement per year and will burn on a combination of
peat and coal. However the coal will have to be imported at a high cost. With regard to electrical
energy the new plant will require 13MW, where the entire country only produces 110 MW.
However Rwanda had an aggressive energy development plan that aims to add 500 MW to the
grid by the end of the decade.
This, together with the high cost of power makes the development of an alternative power source
critical. But how do you do it in an area with few natural energy resources. Again we will start
with waste heat, and then investigate other options, integrating into the national energy plan for
Rwanda. Here the focus is on having power, not really the cost.
In closing there are a few aspects to managing energy risk in Africa,
1) Know and understand the power an fuel requirements of the plant. If you want to assess
the electrical energy risk, of your plant you need to know not only the kWh usage, but
also the load variation, startup loads internal power factors and the variation of the loads
during the day and between summer and winter. This must then be matched to the
delivery capacity of a constrained grid, if there is one.
2) Understand the energy resources available, focusing on latent resources that the factory
may have. These latent resources may be more valuable than you think.
3) When developing solutions, starting from a blank sheet is critical. Sometimes interesting
solutions become available when combining more than one technology in a solution that
provides base load energy for the plant.
4) Understand the limits to the bankability of the project. I want to say something special
about bankability and the financial of energy projects. This is probably the most important
thing to get right from the beginning. Energy is not part of the traditional core of cement
and is often outsourced, however since the financial crisis of 2008 it has become
increasingly difficult to bank captive IPP projects due to the impacts of these on the
balance sheets of hosts. Also the cost of project financed projects, and the ridiculous
country risks being imposed on project developers are a huge barrier on implementing

6. projects. Therefore it will be important to get these right in the beginning.
Finally, I thank you for allowing me to tell you about our learnings on the southern part of Africa,
and I am excited to have been part of this event. Moscow has always been a dream destination for
me and I am honored to be part of this event
I thank you