Eskom still negotiating contracts for coal to see out winter

JOHANNESBURG – Eskom is still involved in negotiating contracts for coal supply to see the power utility through this winter, as coal stockpiles at some of its power stations remain at uncomfortably low levels.

Yesterday, however, spokesperson Khulu Phasiwe would not divulge the figures that the power utility was discussing with the companies. He said Eskom needed the coal in order to get through winter, a time when demand for electricity normally spikes.

He also would not give the number of companies that Eskom would sign the contracts with. “It will depend on the price and quality of the coal,” Phasiwe said. “The key issue is the price and quality. It will not help to get the right price when quality is poor.”

Phasiwe said the number of power stations with shortages below the required 20 days – as stipulated in the Grid Code – remained at six. “We take comfort in the fact that the number is not going up,” he said.

The power utility has been diverting coal supplies from other power stations in order to alleviate the coal shortages.

Speaking at Eskom’s state of the system briefing last month, chief executive Phakamani Hadebe was upbeat about the prospects of addressing the coal shortages at the affected power stations. At the time, Eskom had reduced the number of distressed power stations from seven to six.

Projection

“We are happy to say we now have six. And if we are lucky and it works according to projection that in one or two weeks that it will decrease to five”, said Hadebe.

Eskom has previously said that it had a database of coal suppliers who could supply the much-needed coal. The utility has attributed the coal shortages to historical underinvestment at so-called cost-plus mines as well as under performance – in quality and quantity – from mines owned by the Gupta family.

In a move tantamount to backtracking from an earlier stance taken by former chief executive Brian Molefe, Hadebe said Eskom would prioritise investment in the so-called cost-plus mines.

Molefe had likened the investments in cost-plus mines to buying the bakery when all that was needed was bread. In the cost-plus model, Eskom is required to bear all capital expenditure costs for the establishment, development and expansion of a coal mine situated near an Eskom power station. Eskom has previously expressed displeasure at declining volumes from the “tied” collieries.

Phasiwe said Eskom’s priority was to secure supply for the troubled power stations, adding that the power utility was in discussions with mining companies for short-term coal contracts. He said the discussions centred mainly on the price and quality of the coal. “Unfortunately for us, it is a seller’s market,” he said.

– BUSINESS REPORT