Eskom coal supplier to reduce black ownership

EXXARO Resources, Eskom’s biggest black-owned coal supplier, received the green light from its shareholders at a meeting on Friday for the first step in a transaction that will see its black ownership slip to 30% from above 50%, staring down pressure from Eskom.

Exxaro’s executive head of stakeholder accountability, Mzila Mthenjane, said that with its replacement black shareholding structure Exxaro would continue to be the largest black-owned JSE-listed entity and the largest black-owned supplier to Eskom.

But for the past few years Eskom has pursued a policy of only signing new contracts with suppliers that have more than a 50% black shareholding.

While Eskom cannot change the terms of its existing longterm supply agreements with Exxaro, more than 50% black shareholding is increasingly a requirement of new ones.

Exxaro management said in the latest annual report the company intended to diversify away from its significant exposure to Eskom.

The company had engaged with Exxaro about the fact that it would no longer be black-controlled – but finding the funding for a 50% black shareholding structure, and the significant gearing it would have amid volatile commodity prices, made that impractical, Mthenjane said.

The 10-year lock-up period for Main Street 333, the BEE entity that held 50.19% of Exxaro’s shares, expired at the end of November.

Exxaro said it would replace this with a new BEE structure holding 30% of its shares.

On Friday, 99.37% of Exxaro’s qualifying shareholders approved a proposal to buy back some of the Main Street shares at R3.5-billion.

Over the next six months Exxaro would implement the next steps.

Main Street’s shares would be bought back at R80.20, representing an 8% discount to the 20-day volume-weighted average price of R87.18.

The Main Street structure also included a portion of shares held by Anglo American, which it sold as part of the unwinding, and a loan to fund the purchase of Exxaro shares, which would be repaid.

Once the structure is unencumbered by debt, its remaining Exxaro shares will be distributed to its shareholders, who can choose to retain them or sell them through a coordinated committee including executives from Main Street and Exxaro.

In the final step in the process Exxaro will put in place the new 30% shareholding structure, which also has to be approved by its shareholders. – BDLive