Eskom denies coal supply crisis
Power utility brushes off claims of a call made for an ‘emergency’ to be declared over coal stockpile shortages
ESKOM has denied claims of a coal supply crisis after reports emerged of alarming coal supply problems at coalfired power stations in Mpumalanga and that it recommends that a coal supply “emergency” be declared.
Eskom said yesterday that stockpiles at seven power stations, Arnot, Camden, Hendrina, Majuba, Tutuka, Kriel and Komati are low – and that additional coal contracts for all these stations are being concluded.
Ronald Chauke, Outa’s energy portfolio manager, said the civil rights organisation was concerned over coal supply problems at Eskom, while the utility is applying for a R66.6bn clawback from the energy regulator.
“SA couldn’t afford the increases required by Eskom over the past decade, all due to poor leadership and mismanagement,” Chauke said.
Energy expert Chris Yelland said no indication was provided on how many days of usable coal were in the stockyard
“The reports indicate that the coal in the Matla stockyard is unusable,” Yelland said.
Eskom spokesperson Khulu Phasiwe brushed off suggestions the utility is incapable of supplying enough coal.
A report by Yelland said Eskom denied that a call was made to officials that a coal supply emergency should be declared. “It would be highly irregular and irresponsible if the board, the minister and the regulator could learn anything about this company through media reports. Eskom will release all its operational and financial information once all the correct protocols have been followed,” Phasiwe said.
Chauke said that in Outa’s presentation in opposition to the granting of the R66.6bn by the energy regulator, that Eskom overspent on primary energy to the tune of almost R100bn over the past seven years.
“Eskom’s primary energy costs grew from R18bn in 2007 to more than R82bn in 2017, while electricity generation has declined.”
According to the energy expert, the coal supply problems at Eskom arise from declining production volumes from a number of “tied” coal mines that are linked with and supply coal directly to specific Eskom power stations in Mpumalanga.
The coal supply arrangements with tied collieries require that Eskom bear all capital expenditure costs for the establishment, development and expansion of a tied coal mine.
Eskom then contracts with a coal miner to operate the mine and deliver coal to the tied power station on a “cost plus” basis, with the contract price for coal delivered covering only the engineering, fixed and variable operating costs, plus a management fee.
However, for the past five years or so, Eskom has been failing to meet its capex commitments for the ongoing development and expansion of a number of tied collieries, which resulted in massive declines in the production of coal delivered from these tied mines to Eskom, in some cases to as low as 20% of planned levels.
The result has also seen massive associated price increases per ton of coal delivered, because the fixed overhead and management fees are then recovered off a much lower production volume.
‘NO COAL CRISIS’: Eskom says suggestions it is incapable of supplying coal to its power stations in Mpumalanga are untrue.