Utility to request proposals for Kusile coal supply

Cape Town — Eskom is to issue a request for proposals (RFP) to supply coal on long-term contract to the Kusile power station, which is under construction, Ayanda Nteta, acting GM for fuel sourcing at Eskom, said on Thursday.

Anglo American Coal’s New Largo project, next to Kusile, near Witbank, would have the capacity needed to supply the 4,800MW power station. Anglo and Eskom have signed a memorandum of understanding relating to supply, but no work has begun on a mine because it does not meet Eskom’s black ownership requirements, raising doubt about the power station’s viability.

New Largo is understood to be one of the assets that Anglo is planning to sell.

Nteta, who was speaking at the IHS Markit South African Coal Export Conference 2017, said Eskom would indicate in its RFP the total volume and the duration of its requirements, but respondents could state how much coal they could supply and over what period.

“It will depend on what the market has to offer.

“If you have coal for two years or for 30 years, you can tender that,” she said.

On the sidelines of the event, Eskom spokesman Khulu Phasiwe said the power utility intended to procure coal for Kusile from several different suppliers to ensure security of supply, for example in the event of one mine experiencing production disruptions.

Kusile’s first unit is now being synchronised to the grid, for which it has enough shortterm coal, but longer-term contracts should be in place by the end of Eskom’s 2018 financial year, Phasiwe said.

Nteta told the conference Eskom had revised its coal procurement strategy over the past year, focusing on planning, contract negotiation, supply management, logistics and stockpile management. Its objectives were to achieve a delivered cost in line with the National Energy Regulator’s price determination and a balance between shortand long-term contracts for security of supply.

There was an incorrect perception that Eskom bought coal on the spot market, she said. Its short-term contracts were for three years and its long-term contracts for a minimum of 10 years. It did not intend to pay more for short-term contracts than long-term ones.

Over the past 12-24 months, Eskom has been procuring coal by way of open tender rather than unsolicited bids.

Although some coal companies said this discouraged new mines, Eskom argued that open tendering encouraged new entrants and provided transparency and certainty.

Transformation was imperative and Eskom intended to procure more coal from black youth, women and people with disabilities. Contrary to perceptions that buying coal from new black producers would be more expensive, in fact, the contracts it had awarded to these suppliers in the past year were at lower cost, Nteta said.

Deputy director-general of mineral policy and promotion in the Department of Mineral Resources Joel Raphela said discussions on designating coal were under way between the government and stakeholders.