[miningmx.com] – SOUTH African electricity utility, Eskom, had issued summons to the Glencore-controlled Optimum Holdings and Optimum Mine to pay it R2bn in penalties for supplying coal at qualities below levels agreed in a long-term contract.
Brian Molefe, acting CEO of Eskom, said Glencore had asked it to “relieve it” of the penalty and to allow an increase in the price of coal from Optimum Mine. However, the utility was “not in the business” of bailing out the country’s coal mines, he said.
“How can we ask residents of Soweto to pay their debts and then allow Glencore not to pay its penalties to Eskom?,” said Molefe. Eskom’s Soweto debtors owe it R4.2bn which includes current amounts up from R3.6bn in the 2013/14 financial year.
Glencore last week said it had put Optimum Holdings and Optimum mine into business rescue proceedings after pumping billions of rands into the mine. Glencore had been negotiating for an increase in the price of coal to R300/t from R150/t currently.
Optimum mine supplies about 5.5 million tonnes/year to Eskom’s Hendrina power station in a contract that runs to 2018. Eskom’s penalty refers back two years to coal qualities that are below the correct size.
Said Molefe: “Eskom’s financial position does not allow us to waive any penalties to rescue a particular mine. We are not in the business of rescuing mines. That is for the business rescue specialists”. He added Eskom would pursue Glencore’s obligation in terms of South African law.
Molefe was commenting at a media briefing following the publication of Eskom’s annual financial and operating results in which it reported R3.6bn net profit, down from R7bn in the previous financial year.
“If Glencore dispute it, we have to argue the matter in court. We are convinced we are owed it because of their shoddy performance,” said Molefe.
Glencore said in response to Molefe’s comments that it would dispute the penalty claim issued by Eskom and that coal supplied to Eskom from Optimum mine was “… amongst the highest quality coal” supplied to Eskom. “Eskom has burnt the coal and it resulted in no meaningful issues for Eskom,” it added.
Molefe repeated earlier statements, reported in Miningmx on June 22, that Eskom would not be pursuing the fixed cost approach to coal procurement because these mines had under-performed in the past.
“We have these cost plus mine that require us to invest in capex on mines that now we do not have the appetite or money for,” said Molefe.
“To the coal industry we have said that going forward we would like to get out of the cost plus arrangements in which we commit to capital to specific mines and bound us to them for 30 years,” he added.
This had been the case at Optimum mine, said Molefe – although Optimum Coal mine supplies Eskom in terms of a fixed contract, not cost plus, which escalates annually.
“At Optimum, when we committed to the contract in 1993, we were getting good quality coal. Now we are tied to that mine so when the quality of the coal deteriorates, we are inflexible,” he said.
“The deterioration in the quality has been contributing to the performance of our generating equipment and damaging it,” he said.
