Chinese giant teams up with PPC for new R3 billion plant in South Africa

PPC has entered into a memorandum of agreement for the construction of a new R3 billion state-of-the-art integrated cement plant in the Western Cape with the Chinese-based Sinoma Overseas Development Company.

PPC said that in July 2024 it had entered with Sinoma Overseas Development Company, in terms of which the parties agreed to partner with each other to identify new projects and opportunities to improve efficiencies of PPC’s operations.

At this end, PPC and Sinoma, which is a cement equipment and engineering company, have entered into a memorandum of agreement for the construction of a new R3 billion state-of-the-art integrated cement plant.

“This new plant will have the ability to provide an enhanced value proposition to both existing and new customers across the Western, Eastern and Northern Cape regions,” said PPC.

“The 1.5 million tons of cement per annum plant, which will replace and increase existing capacity, is planned to be constructed at one of PPC’s current sites.”

The new plant will also be equipped with the latest technology, such as a fully dedicated solar generation system.

The new technology should result in substantial improvement in energy efficiency, reduced coal consumption and lower emissions per ton of cement produced.

Overall, the new plant technology will result in substantial improvements in energy efficiency, reduced coal consumption and lower emissions per ton of cement produced.”

The group said that the the new technology will also result in lower production costs, making PPC more competitive and profitable.

“South Africa’s cement industry is undergoing rapid change, and we are working on building a stronger and more efficient PPC, to become the sustainable leader of the industry in the years to come,” said PPC CEO, Matias Cardarelli

“This changing market dynamic urgently requires modern and cost-efficient assets and environmentally conscious cement producers.”

“At the heart of our turnaround ‘Awaken the Giant’ strategy is the active pursuit of strategic opportunities and projects to ensure that we are successful in a more competitive future market context.”

He added that the new and most advanced energy and environmentally efficient plant in the country will be able to supply customers with lower-carbon cement at a more competitive cost, which marks a major step in the sustainability of our business moving forward.

Although the feasibility studies for the plant have reached an advanced stage, the next three months will see the parties finalise the scope and final assessment of the new plants, as well as the associated turn-key engineer, procure and construct (EPC) agreements.

Subject to the board’s approval, it is believed that the construction of a new plant will start in the second quarter of 2025 and will be commissioned by the end of the calendar year 2026.

The existing plants in the Western Cape will also continue to operate during the construction and commission process, providing funding support and a smooth transition.

Management also believes that the new plant robustly meets all PPC’s capital allocation criteria.

The funding structure still needs to be finalised, but PPC’s management believes that it can be funded from debt facilities within PPC’s current two times net debt to EBITDA covenant.

The move will also be assisted by cash generated by PPC’s existing operations during construction and a payment structure agreed in principle with Sinoma.

“By substituting existing capacity with a more efficient, environmentally friendly and larger plant, we are securing PPC’s competitiveness in a key market, by delivering the best value proposition in the region to our customers,” added Cardarelli.

“This will better position PPC for sustained profitability for decades to come and will ensure the group’s long-term future.”

“It also represents commitment and support of the national objective of economic growth and infrastructure development.”

“The pursuit of this industrial investment, which will be one of the largest in the Western Cape history, demonstrates the continued confidence in South Africa by the PPC board and management.”