Iron ore and Coal

Eskom approves higher Duvha coal price

Eskom approves higher Duvha coal price
Mining News Pro - State-owned electricity producer Eskom confirmed on Monday that the Duvha coal supply agreement (CSA) had been increased to facilitate the sale of South32’s majority shareholding in South32 SA Energy Coal Holdings (SAEC) to black-owned resources group Seriti.

The utility also announced that the CSA modification, which had attracted much criticism in recent months, had also been approved by the National Treasury on May 1.

“As part of the transaction, and due to the strategic importance of securing the coal supply for Duvha, the parties agreed on a modification of the CSA until 31 December 2024,” Eskom said in a statement, without providing any pricing or volume details.

Earlier media reports suggested that the price would rise from R280/t to R550/t.

“The modification of the CSA also secures the continued use of SAEC’s infrastructure at the mine so that alternative coal supplies can be delivered over conveyor into the power station,” Eskom said in a statement, in which it also announced that it had given its consent to the ownership change.

SAEC supplies most of the 2 875 MW power station’s coal requirements from the Ifalethu operation, but, in June 2019, it invoked the hardship clause in the CSA, citing significant financial losses as a consequence of selling coal to Eskom below its cost of mining.

Eskom’s subsequent hardship review and due diligence confirmed that the mine was loss-making, with increased risk of failure.

The utility said that the modification would give it sufficient time to seek alternative coal supplies, if required, and to resolve the coal delivery infrastructure constraints at the power station.

“The CSA modification will also prevent massive job losses at the mine, while securing coal supply for Eskom at an affordable price.”

CEO Andre de Ruyter said that the continued delivery of coal for the Duvha power station was of “critical importance to Eskom”, which was once again implementing regular load-shedding this week.

The agreement, he added, provided security of supply at a price that was affordable to Eskom.

“Prior to this transaction being concluded, Eskom conducted an independent due diligence exercise on Seriti, led by a firm of attorneys.

“Eskom is satisfied the new owners of SAEC have the capacity to fully discharge their obligations to Eskom, in terms of the CSA,” De Ruyter added.

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