CHAPTER 12:Funding

• 12.1DEBT

• 12.1.1Accounting 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.

• 12.1.2 Net financing income/(costs)

			Group					Company
For the year ended 31 December	Note		2023  Rm	2022  Rm				2023  Rm	2022  Rm
Finance income			1 570	694				1 313	566
Interest income relating to:			1 579	699				1 313	566
– Financial assets at amortised cost			42	70				24	26
– Cash and cash equivalents			1 439	612				1 288	540
– Financial assets at FVPL			61	10
– Non-financial assets			31					1
– Finance leases			6	7
Reimbursement of interest income on environmental
rehabilitation funds			(9)	(6)
Commitment fee income				1
Finance costs			(1 252)	(1 052)				(1 543)	(3 517)
Interest expense relating to:			(1 068)	(833)				(1 533)	(3 508)
– Interest-bearing borrowings			(982)	(765)				(439)	(366)
– Financial liabilities at amortised cost			(14)
– Bank overdrafts				(1)					(1)
– Non-financial liabilities			(24)	(17)
– Indebtedness by subsidiaries	17.3							(1 053)	(3 097)
– Lease liabilities	11.4		(48)	(50)				(41)	(44)
Net fair value gains/(losses) on interest rate swaps designated
as cash flow hedges: recycled from OCI			20	(97)
– Realised fair value loss			(44)	(163)
– Unrealised fair value gain			64	66
Unwinding of discount rate on rehabilitation costs	13.3		(244)	(228)				(5)	(3)
Recovery of unwinding of discount rate on rehabilitation costs			28	30
Amortisation of transaction costs			(5)	(6)				(5)	(6)
Borrowing costs capitalised1	10.1.3		17	82
Total net financing income/(costs)			318	(358)				(230)	(2 951)
1 Borrowing costs capitalisation rate:			9.93%	6.09%

• 12.1.3 Interest-bearing borrowings

	Group			Company
At 31 December	2023 Rm	2022 Rm		2023 Rm	2022 Rm
Non-current1	7 480	8 378		2 945	4 034
Loan facility	2 945	3 391		2 945	3 391
Project financing2	4 535	4 344
Bonds3		643			643
Current4	1 443	715		1 153	505
Loan facility	507	502		507	502
Project financing2	290	210
Bonds3	646	3		646	3
Total interest-bearing borrowings	8 923	9 093		4 098	4 539
Summary of interest-bearing borrowings by period of redemption5:
Less than six months	1 074	377		930	283
Six to 12 months	369	338		223	222
Between one and two years	794	1 361		446	1 089
Between two and three years	2 948	795		2 499	446
Between three and four years	556	2 947			2 499
Between four and five years	682	554
Over five years	2 500	2 721
Total interest-bearing borrowings	8 923	9 093		4 098	4 539
1 The non-current portion represents:	7 480	8 378		2 945	4 034
– Capital	7 497	8 387		2 950	4 043
– Reduced by the amortisation of transaction costs	(17)	(9)		(5)	(9)
2 Interest-bearing borrowings relating to the energy operations.
3 The R643 million senior unsecured floating rate note will mature in June 2024.
4 The current portion represents:	1 443	715		1 153	505
– Capital	1 379	657		1 093	450
– Interest capitalised	69	63		64	60
– Reduced by the amortisation of transaction costs	(5)	(5)		(4)	(5)
5 Refer note 16.3.3.3 for details of the undiscounted contractual cash flow maturities.

	Group			Company
At 31 December	2023  Rm	2022  Rm		2023  Rm	2022  Rm
Analysis of movement in interest-bearing borrowings
At beginning of the year	9 093	10 255		4 539	5 555
Interest-bearing borrowings raised	489
Interest-bearing borrowings repaid	(658)	(1 181)		(450)	(1 032)
Interest expense	982	765		439	366
Interest paid	(975)	(752)		(435)	(356)
Capitalisation of transaction costs	(13)
Amortisation of transaction costs	5	6		5	6
At end of the year	8 923	9 093		4 098	4 539

• 12.1.4 Salient terms and conditions of interest-bearing borrowings

Borrower	Instrument		Security	Interest payment basis	Debt assumed date
Loan facility
Exxaro	Bullet term loan	2023	Unsecured	Floating	26 April 2021
		2022
	Amortised term loan	2023	Unsecured	Floating	26 April 2021
		2022
	Revolving credit facility	2023	Unsecured	Floating	26 April 2021
		2022
	Revolving credit facility	2023	Unsecured	Floating	26 April 2021
Project financing		2022
Amakhala SPV	Term loan and reserve facility	2023	Secured	Floating	1 April 2020
		2022
	Term loan	2023	Secured	Fixed	1 April 2020
		2022
Tsitsikamma SPV	Term loan and reserve facility	2023	Secured	Floating	1 April 2020
		2022
LSP SPV	Term loan and reserve facility	2023	Secured	Floating	11 July 2023
	Revolving credit facility	2023	Secured	Floating	11 July 2023
DMTN Programme (bonds)
Exxaro	R643 million senior unsecured floating rate note	2023	Unsecured	Floating	13 June 2019
		2022

				Interest rate
Borrower	Maturity date	Carrying value (Rm)	Undrawn portion (Rm)	Base rate	Margin	Effective rate for transaction costs
Loan facility
Exxaro	26 April 2026	2 539	nil	3-month JIBAR	240 basis points (2.40%)	0.11%
		2 529	nil		240 basis points (2.40%)	0.11%
	26 April 2026	913	nil	3-month JIBAR	230 basis points (2.30%)	0.10%
		1 364	nil		230 basis points (2.30%)	0.14%
	26 April 2026	nil	3 250	1-month JIBAR	265 basis points (2.65%)	N/A
		nil	3 250		265 basis points (2.65%)	N/A
Project financing
Amakhala SPV	30 June 3031	2 504	273	3-month JIBAR	371 to 683 basis points (3.71% to 6.83%)	N/A
		2 611	273		371 to 685 basis points (3.71% to 6.85%)	N/A
	30 June 3031	135	nil	9.46% up to 30 June 2026, thereafter 3-month JIBAR	360 to 670 basis points (3.60% to 6.70%)	N/A
		141	nil		360 to 670 basis points (3.60% to 6.70%)	N/A
Tsitsikamma SPV	31 December 2030	1 709	155	3-month JIBAR	277 basis points (2.77%)	N/A
		1 802	137		278 basis points (2.78%)	N/A
LSP SPV	31 December 2042	463	803	3-month JIBAR	250 to 360 basis points (2.50% to 3.60%)	0.01% were applicable
	31 December 2024	14	36	3-month JIBAR	180 basis points (1.80%)	N/A
DMTN Programme (bonds)
Exxaro	13 June 2024	646	nil	3-month JIBAR	189 basis points (1.89%)	N/A
		646	nil		189 basis points (1.89%)	N/A

Financial covenants

Loan facility

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

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 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 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).

Project financing

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 2023 and 2022:

Tsitsikamma SPV

• 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

• 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.

LSP SPV

There are no financial covenants to be reported on at 31 December 2023 as the LSP project is in the construction phase. Financial covenants will become effective on the Commercial Operations Date.

• 12.1.5 Net cash/(debt)

Net cash is presented by the following items on the statement of financial position:

	Group
	2023  Rm	2022  Rm
Non-current interest-bearing debt	(7 880)	(8 816)
Interest-bearing borrowings	(7 480)	(8 378)
Lease liabilities	(400)	(438)
Current interest-bearing debt	(1 494)	(755)
Interest-bearing borrowings	(1 443)	(715)
Lease liabilities	(51)	(40)
Cash and cash equivalents	19 859	14 812
Cash and cash equivalents	19 859	14 812
Total net cash	10 485	5 241

		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 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
– Lease liabilities paid		(34)			34
– Dividends paid to owners of the parent		(6 686)							(6 686)
– Dividends paid to NCI BEE Parties		(2 237)							(2 237)
– Dividends paid to NCI of Tsitsikamma SPV		(37)							(37)
– Distributions to NCI share option holders		(1)							(1)
– Shares acquired in the market to settle share-based payments		(441)							(441)
Non-cash movements				684	(711)				(27)
Amortisation of transaction costs					(6)				(6)
Interest accrued				(1)	(13)				(14)
Lease remeasurements and modifications				(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
Cash flows		4 946		(462)	685				5 169
Operating activities		11 129							11 129
Investing activities		2 045							2 045
Financing activities		(8 228)		(462)	685				(8 005)
– Interest-bearing borrowings raised		489		(475)	(14)
– Interest-bearing borrowings repaid		(658)			658
– Transaction costs paid on interest-bearing borrowings raised		(13)		13
– Lease liabilities paid		(41)			41
– Dividends paid to owners of the parent		(5 505)							(5 505)
– Dividends paid to NCI BEE Parties		(1 831)							(1 831)
– Dividends paid to NCI of Tsitsikamma SPV		(24)							(24)
– Shares acquired in the market to settle share-based payments		(645)							(645)
Non-cash movements				1 398	(1 424)				(26)
Amortisation of transaction costs					(5)				(5)
Interest accrued					(7)				(7)
Lease remeasurements, modifications and new leases				(14)					(14)
Transfers between non-current and current liabilities				1 412	(1 412)
Translation difference on movement in cash and cash equivalents		101							101
Net cash at 31 December 2023		19 859		(7 880)	(1 494)				10 485

	Company
	2023 Rm	2022 Rm
Non-current interest-bearing debt	(3 281)	(4 410)
Interest-bearing borrowings	(2 945)	(4 034)
Lease liabilities	(336)	(376)
Current interest-bearing debt	(1 200)	(542)
Interest-bearing borrowings	(1 153)	(505)
Lease liabilities	(47)	(37)
Cash and cash equivalents	17 151	13 366
Cash and cash equivalents	17 151	13 366
Total net cash	12 670	8 414

		Company
		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 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
Cash flows		3 731			487				4 218
Operating activities		11 951							11 951
Investing activities		630							630
Financing activities		(8 850)			487				(8 363)
– Interest-bearing borrowings repaid		(450)			450
– Lease liabilities paid		(37)			37
– Dividends paid		(7 961)							(7 961)
– Shares acquired in the market to settle share-based payments		(402)							(402)
Non-cash movements				1 129	(1 145)				(16)
Amortisation of transaction costs					(5)				(5)
Interest accrued					(4)				(4)
Lease remeasurements				(7)					(7)
Transfers between non-current and current liabilities				1 136	(1 136)
Translation difference on movement in cash and cash equivalents		54							54
Net cash at 31 December 2023		17 151		(3 281)	(1 200)				12 670

• 12.1.6 Notes to the statements of cash flows relating to net financing costs received/(paid)

		Group			Company
For the year ended 31 December	Note	2023 Rm	2022 Rm		2023 Rm	2022 Rm
Interest received		1 525	650		1 315	566
Finance income	12.1.2	1 570	694		1 313	566
Non-cash flow items
– Interest income accrued not yet received		(48)	(43)		2
– Reimbursement of interest income on environmental rehabilitation funds	12.1.2	9	6
– Finance lease interest income adjustment	12.1.2	(6)	(7)
Interest paid		(1 100)	(982)		(1 529)	(3 498)
Finance costs	12.1.2	(1 252)	(1 052)		(1 543)	(3 517)
Non-cash flow items
– Unwinding of discount rate on rehabilitation costs	12.1.2	244	228		5	3
– Recovery of unwinding of discount rate on rehabilitation costs	12.1.2	(28)	(30)
– Amortisation of transaction costs	12.1.2	5	6		5	6
– Borrowing costs capitalised	12.1.2	(17)	(82)
– Unrealised fair value gain on interest rate swaps designated as cash flow hedges: recycled from OCI	12.1.2	(64)	(66)
– Finance costs capitalised to loans less finance costs paid and interest accrued not yet paid		12	14		4	10
Net financing costs received/(paid)		425	(332)		(214)	(2 932)

• 12.1.7 Financial liabilities composition

		Group			Company
At 31 December	Note	2023 Rm	2022 Rm		2023 Rm	2022 Rm
Non-current
Derivative financial liabilities designated as hedging instruments		127	112
– Cash flow hedge derivatives: interest rate swaps1		127	112
Total non-current financial liabilities	16.3	127	112
Current
Financial liabilities at FVPL			5
– Derivative financial liabilities			5
Derivative financial liabilities designated as hedging instruments		14
– Cash flow hedge derivatives: FECs1		14
Financial liabilities at amortised cost					15 606	12 059
– Non-interest-bearing loans from subsidiaries2	17.5				769	85
– Treasury facilities with subsidiaries3	17.5				14 837	11 974
Total current financial liabilities	16.3	14	5		15 606	12 059
Total financial liabilities		141	117		15 606	12 059

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.

• 12.1.8 Other liabilities composition

	Group			Company
At 31 December	2023 Rm	2022 Rm		2023 Rm	2022 Rm
Non-current
Long-term incentives	10
Income received in advance	25	26
Total non-current other liabilities	35	26
Current
Leave pay	250	234		26	25
Bonuses	280	362		73	161
VAT	99	61			5
Royalties	40
Carbon tax	3	3
Customer advance payments	4	3
Other	111	107		15	29
Total current other liabilities	787	770		114	220
Total other liabilities	822	796		114	220