ESKOM is to submit a new proposal for the supply of coal from South32’s Wolvekrans Middelburg Complex (WMC) mine in Mpumalanga province to its Duvha power station, said BusinessLive citing comments made by the utility’s CEO’s André de Ruyter on Monday.
A previous proposal was rejected by South Africa’s National Treasury. The treasury vets all major expenditure undertaken by Eskom as a safeguard after a period of overspend by the utility which has contributed to more than R450bn in crippling debt.
“The application that we made to National Treasury didn’t receive a positive response. It has therefore become moot,” said De Ruyter. “We are however preparing another application to National Treasury for an extension of the contract period by further four years with an increase in the contract price.
“This is a significantly smaller application,” he said.
South32, which is headquartered in Perth, initiated new coal supply contract discussions with Eskom in terms of a hardship clause in the WMC-Duvha agreement. South32 has long said that the Duvha contract is lossmaking and that exports from WMC cross-subsidise the portion of the mine’s domestic production.
The negotiation of the contract is especially important as South32 is in the final stages of selling WMC, and its other South African mines, to Seriti Resources.
The upshot of the new coal supply agreement is that Eskom will make preparations to supply Duvha with coal from lower cost alternatives over time. As a result, the WMC supply contract will be extended four years to about 2024 but not to its fullest extent which is contained in an option agreement to 2034.