Eskom is focused on procuring coal of the required quality, quantity and price for its power stations

Friday, 29 January, 2016: Eskom and Exxaro Resources had a 40-year contract for the supply of coal to Arnot mine that ended on 31 December 2015. Eskom was unable to renew the cost-plus contract due to the exorbitant coal price as well as the mine supplying below the contractual requirement. From 2012, Eskom proactively engaged with Exxaro on improving its performance, however these efforts were unsuccessful. As such, the contract was allowed to expire as it was financially imprudent for Eskom to continue to purchase coal at their cost levels.

Eskom, following its standard tendering process approached the open market in an effort to identify cost-efficient suppliers to provide coal to Arnot Power Station. The company has previously stated that this process would be completed in March 2016 and has all intentions of completing by this date. As such, the process has not yet been finalised and therefore no contract has been awarded, any speculation contrary to this is therefore incorrect and mischievous.

Eskom’s Group Executive for Generation, Mr Matshela Koko, said: “In order to ensure business continuity of Arnot, Eskom has responsibly sourced coal from seven interim suppliers. These interim suppliers will ensure security of coal supply pending the conclusion of the long-term contract. One of these suppliers is Optimum who has provided less than 15% of the coal delivered to Arnot in January. All interim suppliers deliver coal significantly below the previous Exxaro price - further demonstrating the correctness of Eskom’s decision to seek a new supplier.”

Mr Koko added that: “Eskom is in no way involved with transactions relating to the ownership of coal mines and is solely focused on procuring coal of the required quality to Eskom’s power stations, at the right time and at optimal cost. The company categorically states that it is moving away from ‘owning the bakery’ to just ‘buying the bread’. Eskom will therefore create market tension through an open and competitive enquiry process to source coal from any suitable supplier.”

He said Eskom is dismayed by accusations regarding any purchase of coal from Optimum due to an ownership change to Tegeta. Eskom further notes that there was no outcry when Eskom previously bought coal from Optimum when it was owned by Glencore nor were there any complaints on the ownership of any other coal supplier.

“These double-standards are unfair and Eskom is unapologetic about engaging with any supplier irrespective of ownership. As such, Eskom will fulfil its mandate and assess suppliers only on their ability to provide coal on negotiated terms and conditions irrespective of any perceived political connections,” Mr Koko said.

Statement issued by Eskom, 29 January 2016