Exxaro looks to fill Eskom coal shortage

Reading Time: 2 minutes

South African miner Exxaro Resources said on Friday it was looking to supply coal to state-owned power utility Eskom, which has been hit by supply shortages, posing a threat to the power supply in Africa’s most industrialised economy.

Eskom, which has fewer than 20 days of coal supply at 10 of its power stations, supplies more than 90% of the nation’s power and is one of its most indebted state firms.

“We have made offers to Eskom. They have, from what I hear, approved those offers,” Exxaro’s Chief Executive Officer Mxolisi Mgojo told Reuters in an interview.

“The final decision is sitting with the (state) Treasury to enable them to execute those contracts.”

Eskom said in September it was trying to secure new contracts with companies to ensure it had enough coal, after a major supplier cut supplies and sought insolvency protection.

Exxaro, which already supplies Eskom’s Matimba, Matla and Medupi Power Stations, aims to enter into short-term contracts with Eskom, said Mgojo.

“We don’t want to get involved in long-term 10-, 20-, 30-year type arrangements,” said Mgojo.

“We want to create the flexibility whereby when the opportunity makes sense for us to play short-term into the Eskom market we have that flexibility to do that.”

Eskom’s Spokesman Khulu Phasiwe said the power utility was “very close” to signing new deals. He declined to confirm that a deal with Exxaro was imminent.

“Hopefully before the end of this month we should be seeing the first trucks coming through to the stations that are affected,” said Phasiwe.

Phasiwe declined to say who Eskom was negotiating coal contracts with, only that it was talking to 12 companies.

“We are not in a position to mention them but some of them include the main players in the market,” Phasiwe said.

Eskom needs 3 million tonnes of coal to close its deficit but was also looking to stockpile a further 10 million tonnes, Phasiwe said.

Eskom, which has a total national output of 45,000 MW, implemented power cutting measures, known locally as “load shedding”, in 2015, denting economic output.