Johannesburg - Power utility Eskom yesterday accused Glencore of deliberately withholding coal from Hendrina Mine in order to force the utility’s hand by exacerbating load shedding last year.
Eskom chief executive, Brian Molefe, said Glencore wanted to renegotiate the coal price increase from R150 to R570 per ton, and when Eskom refused, the mining company stopped supplying the power utility and filed for business rescue.
Read: Molefe wades in to defend Eskom
Molefe argued that it would have been difficult for Eskom to explain the increase in coal costs to the National Energy Regulator of SA (Nersa). Eskom’s management of its primary energy costs, especially coal, often comes under the spotlight when the utility applies for tariff hikes.
“We put our foot down and refused,” Molefe said.
Eskom and Glencore butted heads in August after the renegotiations for the long-term coal supply contract to Hendrina power station collapsed.
Eskom also slapped Glencore with a R2.3 billion penalty for alleged poor quality coal.
Load shedding
“We are not going to waive our claim,” Molefe said. “Otherwise, the public would accuse Eskom of poorly managing its coal contracts.”
Molefe said Glencore had sought to renegotiate the coal contract in bad faith.
“Glencore mentioned that if they stopped supplying us with coal, load shedding would increase. I believe the intention was to cause more load shedding. In August we did not get coal from Glencore.”
Molefe said this had forced Eskom to buy coal on the spot market for between R300 and R400 per ton, and in August Optimum continued to produce coal, but chose to stockpile it.
“We were able to procure the coal. The power station did not close down,” Molefe said.
Glencore last night declined to comment.
Junior miner Tegeta Exploration and Resources, a company partly owned by the Gupta family, ultimately acquired Optimum Coal for R2.15bn last year.
Molefe said Eskom was less interested in who owned Optimum Coal, and more in the agreed price of R150 per ton.
“We will get coal from that mine at R150 per ton until 2018,” he said.
Evaluating bids
He argued that Eskom also had to buy coal on short-term contracts for its Arnot power station, also in Mpumalanga, after the long-term coal contract with Exxaro came to an end in December.
Molefe said the utility was currently evaluating bids for the long-term contract and would make an announcement before the end of the first quarter.
Matshela Koko, the group executive for generation at Eskom, lamented the underperformance of the so-called cost-plus coal mines supplying Eskom with coal on long-term contracts.
The 40-year contract with Exxaro’s Arnot mine was for 4 million tons a year but at the end of the contract Eskom was only getting 1 million tons, forcing the utility to buy coal on the spot market, at higher prices.
“We have been slaughtered out there because our cost-plus mines have not been performing,” Koko said.
Meanwhile, Molefe said Eskom would not implement load shedding for the duration of the planned maintenance programme that ends in August.
BUSINESS REPORT