Exxaro Resources is planning to take action against Eskom, after the power utility resorted to declaring force majeure for the supply coal agreements. Picture: Siphiwe SIbeko/Reuters
Exxaro Resources is planning to take action against Eskom, after the power utility resorted to declaring force majeure for the supply coal agreements. Picture: Siphiwe SIbeko/Reuters

Exxaro plans to take action against Eskom

By Dineo Faku Time of article published Apr 22, 2020

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JOHANNESBURG - Exxaro Resources is planning to take action against Eskom, after the state owned power utility resorted to declaring force majeure for the supply coal agreements for the Medupi and Matimba power stations.

Exxaro said yesterday that Eskom planned to implement the force majeure that would let it refuse to take the fully contractually agreed tons of coal until one month after national lockdown has been completely lifted.

“After consultation with its legal advisers Exxaro is of the view that this event does not constitute force majeure as stipulated in the coal supply agreements, as the power stations are still capable of supplying power,” Exxaro said. “Exxaro will vigorously defend its position in this matter and take the necessary action.”

Exxaro, the largest supplier of coal to Eskom, said the force majeure was not in the spirit of President Cyril Ramaphosa’s Thuma Mina mantra.

“Exxaro is also of the view that this communication from Eskom is not in accordance with the spirit of the call by President Ramaphosa, requesting businesses to continue paying contractors,” the company said.

Ramaphosa earlier this month called on all businesses to continue to pay their suppliers to the extent that they could in order to ensure that those suppliers could also continue to operate and pay their staff and suppliers.

“In this respect, I would like to appeal to all large businesses not to resort to force majeure and stop paying their suppliers and rental commitments, as such practice has a domino effect on all other businesses dependent on that chain,” Ramaphosa said.

Eskom spokesperson Sikhonathi Mantshantsha said that Eskom had issued a precautionary force majeure notice to all of its coal suppliers, including Exxaro.

Mantshantsha said Eskom had notified the suppliers that it may ask them to curtail coal supply in light of the lower demand as a result of the national lockdown.

He said that none had yet been asked to curtail supply.

“The reason for the notice is that demand for electricity has dropped by more than 7500MW since the lockdown was implemented, and Eskom has accordingly had to reduce the supply of electricity.

"We continually seek opportunities for constructive engagements with our suppliers, including Exxaro, and hope this matter will be resolved in that spirit,” Mantshantsha said.

Exxaro chairperson Jeff van Rooyen said in the company’s 2018 annual report that the group was concerned about Eskom’s financial strain. He said that the R69billion extended from the fiscus at the time, while minimal in the context of Eskom’s total debt of over R420bn, would certainly provide some temporary relief.

“Eskom remains a strategic partner for Exxaro and has been a reliable customer in terms of our coal supply. Our relationship has improved considerably since new leadership was appointed to the utility, and we will continue to partner and assist Eskom in this difficult period,” he said.

BUSINESS REPORT 

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