Eskom’s coal dwindles more
INTERVENTIONS MAY BE TOO LATE Former coal supplier cancels contract, claiming it subsidised supply to Eskom by R12m per month.
Five power stations have less than 10 days’ stock, the parastatal admits.
Eskom’s coal stockpile situation has deteriorated further, with five power stations having less than 10 days’ stock. Interventions to stabilise supply may only have a positive impact by March.
Thus Eskom’s entering the rainy season exposed in Mpumalanga, where most coal mines feeding it are situated. Load shedding is a real risk, Eskom spokesperson Khulu Phasiwe told Moneyweb. Eskom is concerned the low stock could leave it exposed if the mines are forced to stop production due to heavy rain.
In the meantime, it’s using costly diesel plants to supplement power from its coal-fired fleet – which could mean further financial deterioration.
In addition, Eskom got a bloody nose in the High Court in Johannesburg when it tried to force a coal supplier, which cancelled its contract, to continue supplying to Majuba Power Station.
Kuyasa Mining confirmed that it stopped supplying about 140 000 tons of coal per month to Majuba – through subsidiary Delmas Coal – in October. In court papers, Kuyasa accused Eskom of negotiating in bad faith about a sustainable tariff escalation model, and said the current rate of R12.34 per GigaJoule (GJ) at which Eskom buys coal from it is less than its production cost.
Kuyasa claims it has been subsidising its coal to Eskom by R12 million per month for the past year and this is ruining it financially. The payment terms were 30 days after receipt of Kuyasa’s invoice.
Arbitration
Kuyasa has offered to continue supplying Eskom until the matter’s settled in arbitration, if Eskom pays it R27/GJ, cash-on-delivery.
Eskom rejected this offer and questions Kuyasa’s economic hardship. An affidavit prepared for court by Eskom’s Petrus Mazibuko, points out that Kuyasa paid its staff bonuses of R18 000 each in 2017/18. Kuyasa claims the payments were for overtime.
Moneyweb earlier reported that Eskom paid its staff bonuses of R88 000 on average in July 2017, and accepted a wage agreement in August 2018, that included a R10 000 after-tax “settlement bonus” for each of the over 33 000 members of the bargaining unit, besides a wage increase way above inflation.
Mazibuko says Eskom can’t afford to pay Kuyasa so much more for its coal and accuses Kuyasa of planning to export the coal at a higher price. Kuyasa rejects Eskom’s poverty claim and refers it to the R600 million coal prepayment it made earlier to a Gupta-owned mine.
Mazibuko discloses that Majuba’s reserve stock levels were at 9.3 days on October 26, and Eskom was diverting coal from other power stations to Majuba.
In August, Eskom CEO Phakamani Hadebe told parliament Eskom’s coal-fired power stations, excluding Medupi and Kusile, had coal stockpiles of on average 28 days, but 10 of the 15 stations had less than 20 days’ stock.
Phasiwe told Moneyweb on Sunday this has since deteriorated to 25 days on average, with 11 power stations now with stockpiles of less than 20 days. Of these, five have less than ten days’ stock.