[miningmx.com] – ESKOM edged to a coal supply from Anglo American’s proposed New Largo coal mine signing a memorandum of understanding (MoU). However, the deal is far from secured with Anglo making clear that empowerment regulations required for the supply contract were clouding a final agreement.
“The purpose of this MoU is to affirm that, while both Anglo American Inyosi Coal and Eskom are broadly aligned regarding Eskom’s empowerment imperatives, we need to establish a framework within which we can co-operate and achieve a mutually beneficial outcome,’ said Themba Mkhwanazi, CEO of Anglo Thermal Coal.
Mkhwanazi is also the chairman of Anglo American Inyosi Coal which is Anglo American’s black economic empowerment partner for the project. Inyosi, actually a consortium of interests, will own 26% of the proposed New Largo colliery which is scheduled to supply coal to Eskom’s Kusile 4,800MW power station in Mpumalanga province.
Whilst a coal supply agreement (CSA) between the country’s coal producers and Eskom turns on a range of factors, some of them technical, the ‘framework’ to which Mkhwanazi refers has to accommodate Eskom’s insistence that new suppliers of coal be 50% plus one share empowered.
This is in terms of the Broad-Based Black Economic Empowerment (BBBEE) legislation adopted by South Africa’s public affairs department to which Eskom reports.
Mining firms, however, adopted separate (and earlier) legislation, the Minerals & Petroleum Resources Development Act (MPRDA) which asks for 26% empowerment in order to apply for a mining permit.
Mark Cutifani, CEO of Anglo American, has said in the past that measures would be taken to agree a structure. That was more than a year ago which, given Eskom’s urgent need for new supplies of coal, means the talks are proving inconclusive.
Zola Tsotsi, chairman of Eskom, told Miningmx in June that he feared there would be a delay in New Largo’s construction which he put down to Anglo’s inability to agree to a new empowerment deal.
Dan Marokane, head of group capital at Eskom, said earlier this week that the two sides were making progress and that the absence of a coal supply agreement with New Largo did not imply Kusile would miss its 2017 commissioning date.
According to Marokane, New Largo was only due to supply Kusile later in its commissioning cycle as some of its other units were fired up. Coal from companies such as Universal Coal would keep Kusile supplied in its early days.
The MoU, which was signed on November 21, paved the way “… for the two companies to negotiate and conclude the commercial and technical aspects of the project,” said Eskom. A parallel discussion “… on the strategic empowerment imperatives and objectives” would also take place.
“The MoU is about how we co-operate to progress the economy and the country to a bright future. Eskom and Anglo American are key pillars of the South African economy and we therefore cannot fail the country,’ said Tshediso Matona, CEO of Eskom.
“This MoU is a culmination of months of negotiations and enables the continued implementation of the New Largo project,” said Mkhwanazi.
