CHAPTER 12:Funding

12.1DEBT

12.1.1 Accounting policies relating to net financing costs and interest-bearing borrowings

Borrowing costs, finance income and other financing expenses

Fees paid on the establishment of loan facilities are capitalised to the loan as transaction costs to the extent that it is directly related to the establishment of the loan facility. These fees are deferred until the draw down occurs upon which it is amortised over the loan term using the effective interest rate method. To the extent that it is not probable that some or all of the facility will be drawn down (ie such as the revolving credit facility), the fee is capitalised as a prepayment and amortised over the period of the facility to which it relates.

General and specific borrowing costs directly attributable to the acquisition or construction of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

Interest income is recognised as it accrues in profit or loss, using the effective interest rate method.

Fees and commission

Fees and commission income and expenses that are integral to the effective interest rate on a financial asset or financial liability are included in the measurement of the effective interest rate. Other fees and commission expenses relate mainly to transaction and service fees and are expensed as the services are rendered.

Loans and borrowings

Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost.

12.1.2Net financing costs

		Group		Company
For the year ended 31 December	Note	2022 Rm	2021 Rm	2022 Rm	2021 Rm
Finance income		694	239	566	157
Interest income relating to:		699	240	566	157
– Financial assets at amortised cost		70	24	26	7
– Cash and cash equivalents		612	195	540	150
– Financial assets at FVPL		10	4
– Non-financial assets			9
– Finance leases		7	8
Reimbursement of interest income on environmental rehabilitation funds		(6)	(4)
Commitment fee income		1	3
Finance costs		(1 052)	(860)	(3 517)	(2 198)
Interest expense relating to:		(833)	(798)	(3 508)	(2 182)
– Interest-bearing borrowings		(765)	(725)	(366)	(383)
– Financial liabilities at amortised cost			(7)
– Bank overdrafts		(1)	(1)	(1)	(1)
– Non-financial liabilities		(17)	(12)
– Indebtedness by subsidiaries	17.3			(3 097)	(1 752)
– Lease liabilities	11.4	(50)	(53)	(44)	(46)
Net fair value losses on interest rate swaps designated as cash flow hedges: recycled from OCI		(97)	(146)
– Realised fair value loss		(163)	(201)
– Unrealised fair value gain		66	55
Unwinding of discount rate on rehabilitation costs	13.3	(228)	(242)	(3)	(3)
Recovery of unwinding of discount rate on rehabilitation costs		30	32
Amortisation of transaction costs		(6)	(13)	(6)	(13)
Borrowing costs capitalised¹	10.1.3	82	307

Total net financing costs		(358)	(621)	(2 951)	(2 041)
¹ Borrowing costs capitalisation rate:		6.09%	6.14%

12.1.3Interest-bearing borrowings

Group

Company

At 31 December

2022
Rm

2021
Rm

2022
Rm

2021
Rm

Non-current¹

8 378

9 255

4 034

4 704

Loan facility²

3 391

4 061

3 391

4 061

Project financing³

4 344

4 551

Bonds⁴

643

Current⁵

715

1 000

505

851

Loan facility²

502

491

502

491

Project financing³

210

149

Bonds⁴

360

Total interest-bearing borrowings

9 093

10 255

4 539

5 555

Summary of interest-bearing borrowings by period of redemption⁶:

Less than six months

377

694

283

629

Six to 12 months

338

306

222

Between one and two years

1 361

652

1 089

445

Between two and three years

795

1 361

446

1 089

Between three and four years

2 947

795

2 499

446

Between four and five years

554

3 172

2 724

Over five years

2 721

3 275

Total interest-bearing borrowings

9 093

10 255

4 539

5 555

¹	The non-current portion represents:

8 378

9 255

4 034

4 704

– Capital

8 387

9 269

4 043

4 718

– Reduced by the amortisation of transaction costs

(9)

(14)

(9)

(14)

²	The loan facility was refinanced during April 2021 which resulted in the extinguishment of the previous loan facility and recognition of the refinanced loan facility.

³	Interest-bearing borrowings relating to the Cennergi group.

⁴	The R357 million senior unsecured floating rate note matured in June 2022.

⁵	The current portion represents:

715

1 000

505

851

– Capital

657

955

450

807

– Interest capitalised

– Reduced by the amortisation of transaction costs

(5)

(6)

(5)

(6)

⁶	Refer note 16.3.3 for details of the undiscounted contractual cash flow maturities.

Refer note 12.1.5 for the amounts repaid and raised in relation to interest-bearing borrowings.

	Group		Company
At 31 December	2022 Rm	2021 Rm	2022 Rm	2021 Rm
Overdraft
Bank overdraft		1		1

The bank overdraft is repayable on demand and interest is based on current South African money market rates.

12.1.4Salient terms and conditions of interest-bearing borrowings

Below is a summary of the salient terms and conditions of the facilities:

		Loan facility
	Year	Bullet term loan	Amortised term loan	Revolving credit facility
Aggregate nominal amount available (Rm)	2022	2 500	1 350	3 250
	2021	2 500	2 025	3 250
Undrawn portion (Rm)	2022	nil	nil	3 250
	2021	nil	nil	3 250
Issue date		26 April 2021	26 April 2021	26 April 2021
Maturity date		26 April 2026	26 April 2026	26 April 2026
Capital payments		The total outstanding amount is payable on final maturity date	Repay each loan in full in equal consecutive semi‑annual instalments on the last business day of April and October of each year	The total outstanding amount is payable on final maturity date
Duration (months)		60	60	60
Secured or unsecured		Unsecured	Unsecured	Unsecured
Interest
Interest payment basis		Floating rate	Floating rate	Floating rate
Interest payment period		Three months	Three months	Monthly
Interest rate
– Base rate		3-month JIBAR	3-month JIBAR	1-month JIBAR
– Margin		240 basis points (2.40%)	230 basis points (2.30%)	265 basis points (2.65%)
Effective interest rates for the transaction costs	2022	0.11%	0.14%	N/A
	2021	0.11%	0.17%	N/A

There were no defaults or breaches in terms of the refinanced loan facility during the reporting period.

The following financial covenants in terms of the loan facility, must be complied with:

Ratio of consolidated net debt¹ to equity of the group for any measurement period shall be less than 0.8:1
Ratio of consolidated EBITDA (excluding Cennergi project financing as well as non-cash BEE credential costs) to net interest expense of the group for any measurement period shall not be less than 4:1
Ratio of consolidated net debt1 to consolidated EBITDA (excluding Cennergi project financing and non-cash BEE credential costs, including dividends received from equity-accounted investments) of the group for any measurement period shall be less than 3:1.

¹	For purposes of financial covenants, net debt is adjusted for project financing, pending litigation and other claims as well as other financial guarantees (refer note 13.4.1).

The group has complied with all the above mentioned contractually agreed financial covenants as illustrated below:

At 31 December	2022	2021
Net (cash)/debt: equity (%)
– Target	<80	<80
– Actual	(15.99)	(1)
EBITDA: interest cover (times)
– Target	>4	>4
– Actual¹		35
Net debt: EBITDA (times)
– Target	<3	<3
– Actual²

¹	2022: Exxaro (excluding Cennergi project financing) is in a net finance income position.
²	Exxaro (excluding Cennergi's net debt) is a net cash position.

		Project financing
	Year	Tsitsikamma SPV loan facility	Amakhala SPV loan facilities¹	Amakhala SPV loan facilities²
Remaining nominal amount outstanding (Rm)	2022	1 801	2 610	141
	2021	1 870	2 686	145
Undrawn portion (Rm)	2022	137	273	nil
	2021	121	273	nil
Debt assumed date		1 April 2020	1 April 2020	1 April 2020
Maturity date		31 December 2030	30 June 2031	30 June 2031
Capital payments		Semi-annual instalments ranging incrementally over the term from 0.18% to 10.65% of the nominal amount	Semi-annual instalments ranging incrementally over the term from 0.18% to 10.65% of the nominal amount	Semi-annual instalments ranging incrementally over the term from 0.18% to 10.65% of the nominal amount
Duration (months)		129	135	135
Secured or unsecured³		Secured	Secured	Secured
Interest
Interest payment basis		Floating rate⁴	Floating rate⁴	Fixed rate⁵
Interest payment period		Semi-annual	Semi-annual	Semi-annual
Interest rate
– Base rate		3-month JIBAR	3-month JIBAR	9.46% up to 30 June 2026, thereafter 3-month JIBAR
– Margin/all in margin range	2022	278 basis points	371 to 685 basis points	360 to 670 basis points
		(2.78%)	(3.71% to 6.85%)	(3.60% to 6.70%)
	2021	266 basis points	361 to 681 basispoints	360 to 670 basis points
		(2.66%)	(3.61% to 6.81%)	(3.60% to 6.70%)

¹	Comprising the following loan facilities at the specified all in margin:	2022	2021
	– Senior A and C
	– Senior IFC	+3.75	+3.61
	– Subordinate A and C	+3.71	+3.71
	– Subordinate IFC	+6.85	+6.71
	These margins are subject to variation.	+6.81	+6.81
²	Comprising the following loan facilities at the specified all in margin:
	– Senior B	+3.60	+3.60
	– Subordinate B	+6.70	+6.70
³	Security held over the assets and share capital of Tsitsikamma SPV and Amakhala SPV respectively
⁴	Interest payments are hedged from a floating rate to a fixed rate. Refer note 16.3.3.2.3.2
⁵	The facility will become a floating rate facility from 30 June 2026.

There were no financial covenants defaults or breaches in terms of the project financing during the reporting periods.

The project financing is subject to the following financial covenants which have been achieved for both 2022 and 2021:

Tsitsikamma SPV loan facility

Historic debt service cover ratio¹ for the calculation period ending on a calculation date is not less than 1.10:1
Minimum annual forecast debt service cover ratio for the next calculation period is not less than 1.10:1
Loan life cover ratio² is not less than 1.15:1
Project life cover ratio³ is not less than 1.25:1

¹	The ratio of A to B where, A is the aggregate cash flow available for debt service (CFADS) less taxes and B is the aggregate of the finance costs, in each case for the relevant calculation period.
²	The ratio of A to B where, A is the net present value of forecast CFADS from such calculation date to (and including) the final scheduled repayment date, discounted at the discount rate (as produced by the financial model) and B is the aggregate of the facility outstanding on such calculation date.
³	The ratio of A to B where, A is the net present value of forecast CFADS from such calculation date to the end of the tenor of the PPA discounted at the discount rate and B is the aggregate of facility outstanding as at such calculation date.

Amakhala SPV loan facilities

Projected senior debt service cover ratio¹ for the immediately following measurement period is not less than 1.10 : 1
Historic senior debt service cover ratio¹ for the immediately preceding measurement period is not less than 1.10 : 1
Senior loan life cover ratio², as at each measurement date, is not less than 1.15 : 1
Senior project life cover ratio², as at each measurement date, is not less than 1.30 : 1
Projected total debt service cover ratio³ for the immediately following measurement period is not less than 1.05 : 1
Historic total debt service cover ratio³ for the immediately preceding measurement period is not less than 1.05 : 1
Total loan life cover ratio⁴, as at each measurement date, is not less than 1.10 : 1
Total project life cover ratio⁴, as at each measurement date, is not less than 1.20 : 1

¹	The ratio of CFADS to senior debt service for that period.
²	The ratio of the applicable total present value amount, as at that measurement date to the sum of (i) the senior facility outstanding and (ii) all the IFC facility outstanding, as calculated and produced by the financial model, as part of the forecast for that measurement date.
³	The ratio of CFADS to total senior debt service for that period.
⁴	The ratio of the applicable total present value amount, as at that measurement date to total facility outstanding, as calculated and produced by the financial model, as part of the forecast for that measurement date.

		DMTN Programme (bonds)
	Year	R357 million senior unsecured floating rate note¹	R643 million senior unsecured floating rate note
Aggregate nominal amount (Rm)	2022		643
	2021	357	643
Issue date or draw down date		13 June 2019	13 June 2019
Maturity date		13 June 2022	13 June 2024
Capital payments		No fixed or determined payments, the total outstanding amount is payable on final maturity date	No fixed or determined payments, the total outstanding amount is payable on final maturity date
Duration (months)		36	60
Secured or unsecured		Unsecured	Unsecured
Interest
Interest payment basis		Floating rate	Floating rate
Interest payment period		Three months	Three months
Interest rate
– Base rate		3-month JIBAR	3-month JIBAR
– Margin		165 basis points (1.65%)	189 basis points (1.89%)

¹	Matured in June 2022.

12.1.5Net cash/(debt)

	Group
	2022 Rm	2021 Rm
Net cash/(debt) is presented by the following items on the statement of financial position: Non-current interest-bearing debt	(8 816)	(9 725)
Interest-bearing borrowings	(8 378)	(9 255)
Lease liabilities	(438)	(470)
Current interest-bearing debt	(755)	(1 034)
Interest-bearing borrowings	(715)	(1 000)
Lease liabilities	(40)	(34)
Net cash and cash equivalents	14 812	7 041
Cash and cash equivalents	14 812	7 042
Overdraft		(1)

Total net cash/(debt)	5 241	(3 718)

	Group
			Liabilities arising from financing activities
		Cash and cash equivalents/ (overdraft) Rm	Non-current interest-bearing debt Rm	Current interest-bearing debt Rm	Total Rm
Net debt at 31 December 2020		3 187	(7 954)	(6 200)	(10 967)
Cash flows		3 819	(2 750)	6 137	7 206
Operating activities		8 432			8 432
Investing activities		13 419			13 419
Financing activities		(18 032)	(2 750)	6 137	(14 645)
– Interest-bearing borrowings raised		4 725	(4 725)
– Interest-bearing borrowings repaid		(8 076)	1 975	6 101
– Distributions to NCI share option holders		(7)			(7)
– Dividends paid to NCI of Tsitsikamma SPV		(5)			(5)
– Loan from NCI repaid		(69)			(69)
– Lease liabilities paid		(36)		36
– Dividends paid to owners of the parent		(9 557)			(9 557)
– Shares acquired in the market to settle share-based payments		(382)			(382)
– Shares repurchased including transaction expenses		(1 506)			(1 506)
– Dividends paid to NCI BEE Parties		(3 119)			(3 119)


Non-cash movements			979	(971)	8
Amortisation of transaction costs			(3)	(10)	(13)
Interest accrued				19	19
Lease remeasurements and modifications			(12)		(12)
Disposal of lease liabilities			7	8	15
New leases			(1)		(1)
Transfers between non-current and current liabilities			988	(988)
Translation difference on movement in cash and cash equivalents		35			35

Net debt at 31 December 2021	7 041	(9 725)	(1 034)	(3 718)
Cash flows	7 783	225	990	8 998
Operating activities	14 410			14 410
Investing activities	3 990			3 990
Financing activities	(10 617)	225	990	(9 402)
– Interest-bearing borrowings repaid	(1 181)	225	956
– Distributions to NCI share option holders	(1)			(1)
– Dividends paid to NCI of Tsitsikamma SPV	(37)			(37)
– Lease liabilities paid	(34)		34
– Dividends paid to owners of the parent	(6 686)			(6 686)
– Shares acquired in the market to settle share-based payments	(441)			(441)
– Dividends paid to NCI BEE Parties	(2 237)			(2 237)

Non-cash movements		684	(711)	(27)
Amortisation of transaction costs			(6)	(6)
Interest accrued		(1)	(13)	(14)
Lease remeasurements and terminations		(7)		(7)
Transfers between non-current and current liabilities		692	(692)
Translation difference on movement in cash and cash equivalents	(12)			(12)
Net cash at 31 December 2022	14 812	(8 816)	(755)	5 241

	Company
	2022 Rm	2021 Rm
Net cash/(debt) is presented by the following items on the statement of financial position:
Non-current interest-bearing debt	(4 410)	(5 112)
Interest-bearing borrowings	(4 034)	(4 704)
Lease liabilities	(376)	(408)
Current interest-bearing debt	(542)	(880)
Interest-bearing borrowings	(505)	(851)
Lease liabilities	(37)	(30)
Net cash and cash equivalents	13 366	4 867
Cash and cash equivalents	13 366	4 868
Overdraft		(1)

Total net cash/(debt)	8 414	(1 125)

	Company
		Liabilities arising from financing activities
	Cash and cashequivalents/ (overdraft) Rm	Non-current interest-bearing debt Rm	Current interest-bearing debt Rm	Total Rm
Net debt at 31 December 2020	1 847	(3 180)	(6 076)	(7 409)
Cash flows	3 020	(2 750)	6 024	6 294
Operating activities	14 417			14 417
Investing activities	7 342			7 342
Financing activities	(18 739)	(2 750)	6 024	(15 465)
– Interest-bearing borrowings raised	4 725	(4 725)
– Interest-bearing borrowings repaid	(7 975)	1 975	6 000
– Lease liabilities paid	(24)		24
– Dividends paid	(13 721)			(13 721)
– Shares repurchased including transaction expenses	(1 506)			(1 506)
– Shares acquired in the market to settle share-based payments	(238)			(238)

Non-cash movements		818	(828)	(10)
Amortisation of transaction costs		(3)	(10)	(13)
Interest accrued			9	9
Lease remeasurements		(7)		(7)
Transfers between non-current and current liabilities		827	(827)
Other		1		1

Net debt at 31 December 2021	4 867	(5 112)	(880)	(1 125)
Cash flows	8 511	225	836	9 572
Operating activities	18 671			18 671
Investing activities	861			861
Financing activities	(11 021)	225	836	(9 960)
– Interest-bearing borrowings repaid	(1 032)	225	807
– Lease liabilities paid	(29)		29
– Dividends paid	(9 669)			(9 669)
– Shares acquired in the market to settle share-based payments	(291)			(291)

Non-cash movements		477	(498)	(21)
Amortisation of transaction costs			(6)	(6)
Interest accrued			(10)	(10)
Lease remeasurements		(5)		(5)
Transfers between non-current and current liabilities		482	(482)
Translation difference on movement in cash and cash equivalents	(12)			(12)

Net cash at 31 December 2022	13 366	(4 410)	(542)	8 414

12.1.6Notes to the statements of cash flows relating to net financing costs paid

		Group		Company
For the year ended 31 December	Note	2022 Rm	2021 Rm	2022 Rm	2021 Rm
Interest received		650	217	566	150
Finance income	12.1.2	694	239	566	157
Non-cash flow items
– Interest income accrued not yet received		(43)	(18)		(7)
– Reimbursement of interest income on environmental rehabilitation funds	12.1.2	6	4
– Finance lease interest income adjustment	12.1.2	(7)	(8)
Interest paid		(982)	(1 017)	(3 498)	(2 191)
Finance costs	12.1.2	(1 052)	(860)	(3 517)	(2 198)
Non-cash flow items
– Unwinding of discount rate on rehabilitation costs	13.3	228	242	3	3
– Recovery of unwinding of discount rate on rehabilitation costs	12.1.2	(30)	(32)
– Amortisation of transaction costs	12.1.2	6	13	6	13
– Borrowing costs capitalised	12.1.2	(82)	(307)
– Unrealised fair value gain on interest rate swaps designated as cash flow hedges: recycled from OCI	12.1.2	(66)	(55)
– Finance costs capitalised to loans less finance costs paid and interest accrued not yet paid		14	(18)	10	(9)

Net financing costs paid		(332)	(800)	(2 932)	(2 041)

12.1.7 Financial liabilities composition

		Group		Company
At 31 December	Note	2022 Rm	2021 Rm	2022 Rm	2021 Rm
Non-current
Derivative financial liabilities designated as hedging instruments		112	406
– Cash flow hedge derivatives: interest rate swaps¹		112	406

Total non-current financial liabilities	16.3	112	406
Current
Financial liabilities at FVPL		5
– Derivative financial liabilities		5
Financial liabilities at amortised cost				12 059	9 746
– Non-interest-bearing loans from subsidiaries²	17.5			85	76
– Treasury facilities with subsidiaries³	17.5			11 974	9 670

Total current financial liabilities	16.3	5		12 059	9 746
Total financial liabilities		117	406	12 059	9 746

¹	Refer note 16.3.3.2.3.2.
²	Loans granted by subsidiary companies which are interest free, unsecured and repayable on demand.
³	Treasury facilities with subsidiary companies have no repayments terms and are repayable on demand. Interest is charged at money market rates.

12.1.8Other liabilities composition

	Group		Company
At 31 December	2022 Rm	2021 Rm	2022 Rm	2021 Rm
Non-current
Income received in advance	26	26
Total non-current other liabilities	26	26
Current
Termination benefits		82		36
Leave pay	234	241	25	34
Bonuses¹	362	481	161	139
VAT	61	26	5	14
Royalties		73
Carbon tax	3	2
Customer advance payments	3
Other	107	89	29	12
Total current other liabilities	770	994	220	235
Total other liabilities	796	1 020	220	235

¹	From 1 January 2022, Exxaro implemented a new short-term incentive scheme, which comprises the GIS and LOS incentive schemes.

CHAPTER 12:Funding

Tsitsikamma SPV loan facility

Amakhala SPV loan facilities

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