South African power utility Eskom said on Friday it has withdrawn its objections to the takeover of miner Xstrata by commodities trader Glencore , removing a potential hurdle to the $33 billion deal.
Eskom said it had agreed with Glencore on a framework for their discussions on coal supply and address the utility's concerns about getting sufficient product at the right price.
Eskom initially asked South Africa's competition regulator to impose conditions on the Glencore to ensure its coal supplies were not at risk.
“In consequence of the agreement reached between the parties, Eskom has agreed to withdraw its intervention in the merger proceedings,” the utility said in a statement.
Eskom relies on coal-fired plants to generate 85 percent of the electricity that powers Africa's biggest economy and has been keen to ensure the merger does not impede its ability to obtain timely, sufficient and competitively priced coal.
Xstrata is one of South Africa's biggest coal producers and a key supplier of the fuel to Eskom. The merged entity will be supplying 15 percent of Eskom's coal and will also be among the largest traders in the coal market, the utility has said.
Eskom hopes to ensure that the merged entity does not dominate the market by setting prices that are unaffordable to the utility or opt for exports hoping for higher returns.
Insufficient and poor qualities of coal have been a concern to Eskom in the past and affected its ability to meet fast rising demand for electricity in Africa's top economy.
Glencore's long-awaited $33 billion takeover of Xstrata only has two hurdles left to clear: final approval from competition authorities in South Africa and China. The hearings in South Africa will last until January 28. - Reuters