Johannesburg - Transnet has pledged to put up its own capital to help junior coal producers increase their exports as the utility accuses big mining firms of trying to create monopolies and refusing to relinquish spare capacity.
Transnet chief executive Brian Molefe said the likes of BHP Billiton, which this week refused to give up the capacity it was not using for junior coal producers, were the companies that necessitated Transnet’s consideration to build a second terminal, next to the existing Richards Bay coal terminal.
“The problem with Richards Bay is that a few players in the market got a concession at the terminal and now they are refusing to allow the small guys to take the coal through the port,” Molefe said.
“I had a very disastrous meeting with BHP early in the week where we nearly came to blows because they are refusing to give up an additional 1 million tons for the small guys despite the amount of coal that we’re railing and putting through to the terminal.”
Molefe said BHP Billiton had not only created problems in freeing additional capacity for others but negotiating its contract had also been a headache. The utility has been trying to sign a 10-year take or pay agreement with the mining giant, Molefe said. Other members of the industry had already signed such deals.
Transnet is pursuing long-term contracts so that it would be easy for the company to raise funds for its market demand strategy.
“We’ve been negotiating the BHP contract for the last three years and BHP has actually been benefiting because of the fact that there have not been tariff increases during that period because we’ve been having month-on-month contracts. Now it’s very difficult for us to go and borrow 10-year paper to come and build infrastructure here with month-to-month contracts,” Molefe said.
BHP Billiton said it could not comment last night.
Transnet Group chief financial officer Anoj Singh said a number of junior coal producers had approached Transnet to assist them in securing additional capacity at Richards Bay.
He estimated that the proposed new terminal would have about 10 million tons to accommodate the junior producers.
Although he could not tell how much capacity companies did not use, he said the Richards Bay terminal had annual capacity of 92 million tons and he believed that the companies that leased the terminal did not yet have the ability to export that much coal.
He said Transnet had contracts that would increase its coal export line cargoes to 81 million tons in the next year or two and estimated that it would reach 92 million tons by the end of the market demand strategy’s seventh year.
The land on which the Richards Bay coal terminal is built belongs to the Transnet National Port Authority but it is leased to private companies, which have spent millions to develop it. The companies that have concessions have already allocated 4 million tons of capacity to others through the quadrant scheme.
Molefe said his concern was that the terminal was a state asset but had “been given to the private companies for the pursuit of their own self interest and nobody else’s”.
He said he was not challenging the rights of the companies that developed the terminal to operate it if they did not want to share it, as they were entitled to do so in terms of their leases.
“We are not about to do anything extrajudicial, We are going to respect the existing contracts, but we will build something next door,” he said.
Transnet expected to complete a front-end level feasibility study on the new terminal in a couple of months. The amount that would be invested to build the terminal would be determined then.
The utility expected further increases in coal exports from junior producers as efficiency would improve on the Richards Bay coal line when all the electric locomotives planned for that line had been acquired.
Singh said the upgrade of the existing Waterberg coal line as well as the construction of a new one would open opportunities for more coal exports. - Business Report