Eskom, Exxaro in dispute over BEE level

ESKOM and Exxaro Resources are set to meet over Eskom’s concerns about a drop in the JSElisted mining company’s black ownership from 50.19 percent to 30 percent.

Exxaro last month announced that is was unwinding its existing black economic empowerment (BEE) and announced a replacement BEE transaction that would culminate in a new BEE entity that would own 30 percent of the group.

A 30 percent ownership level is, however, below the 50 percent that Eskom wants from its coal suppliers. “Eskom’s coal procurement policy requires all the mines that supply coal to its power stations to have a black ownership target of more than 50 percent throughout the life of the mine,” Eskom said yesterday.

Exxaro is one of Eskom’s biggest coal suppliers.

Eskom said it would seek a meeting with Exxaro “in an effort to understand how they plan to comply with the 50 per- cent-plus policy requirements. Eskom will continue to create a conducive environment that will stimulate the growth of emerging black coal miners into major coal suppliers.”

In 2012, Eskom and the departments of Public Enterprises and Mineral Resources developed the Black Emerging Miner Strategy. “This strategy has been largely successful, with coal from (black emerging mining houses) increasing from R1.7 billion (6 percent) in 2012 to R6.9bn (18 percent) in 2015 and is projected to rise to R14bn in 2020,” Eskom said.

Eskom interim group chief executive Matshela Koko described Eskom’s policy of sourcing coal from majority blackowned suppliers as a thorn in the side of many of the power utility’s main coal suppliers.

These suppliers subscribed to a “once empowered always empowered” principle, and a black ownership target of 26 percent rather than a minimum of 50 percent black ownership, Eskom said.

“What is actually happening is that the ongoing legacy of the pre-1994 economy is being confronted by the Eskom leadership. This is the legacy that we have not worked hard enough to dismantle, and at times have been frightened to confront. Eskom has resolved to do something radically different,” it said.

Eskom said the pursuit of transformation in the coal supply industry should not be at the expense of coal supply to its power stations. It said coal qualities should remain within specifications “and the cost must be within the range prescribed by the National Energy Regulator of South Africa”.

Eskom said coal was the lifeblood of the South African economy and provided the bulk of the country’s energy needs.

“Without coal-derived electricity, industries such as manufacturing, financial services and social services would be severely crippled, an estimated 430 000 people would be without work or financial means, and the country would stop growing. South Africa, therefore, needs coal to ensure that the economy continues to grow as it diversifies its energy mix into the future,” it said.

In a terse statement yesterday, Exxaro said it would meet with Eskom to discuss the BEE ownership, but declined to comment further.

Eskom spokesman Khulu Phasiwe said yesterday that the date of the proposed meeting had not been finalised.

Exxaro’s share price rose 7.07 percent on the JSE yesterday to close at R87.80.