South Africa: Glencore lashes out at Eskom over coal c laims

Eskom, power utility.

Eskom, power utility.

12 August 2015, Johannesburg – The coal supplied by its Optimum coal unit is amongst the highest quality coal supplied to Eskom and is the quality of coal that the mine is capable of producing on a sustainable basis, Glencore [JSE:GLN] said on Tuesday.

This was in reaction to repeated statements by Eskom acting CEO Brian Molefe at the release of the group’s annual results earlier on Tuesday that the current coal it gets from Optimum is inferior in quality and has even damaged Eskom’s equipment.

“Eskom has burnt the coal and it resulted in no meaningful issues for Eskom. Optimum is now in business rescue as a result of the severe financial hardship which it has been suffering as a result of the Eskom contract,” Glencore said in a statement.

The business rescue practitioners will determine the appropriate course of action for Optimum and are attempting to engage with Eskom.

“Glencore is willing to extend certain post commencement funding to Optimum to afford the business rescue practitioners an opportunity to assess the company and time to prepare a business rescue plan for Optimum,” said Glencore.

It added that Optimum is, furthermore, disputing an Eskom penalty claim made my Molefe, which would have the effect of Optimum supplying coal to Eskom for an effective price of R1 per tonne.

Molefe said at the release of the annual results that Eskom’s financial position does not allow it to renegotiate any contracts “simply to rescue a mine”. He emphasised that Eskom needs to contain its coal costs.

“We have indicated to all of our coal suppliers that we are interested in a tender for coal of a certain quality,” Molefe said.

“Our current coal contract has two years to go at a particular price and they are asking to be released from their obligation. We do not want to add to capital expenditure at any particular mine. So we want the flexibility to move to where we can buy the best quality of coal.”

Molefe said he does not see the coal industry objecting to Eskom getting the right quality of coal.

“We would like to get very healthy coal for our plant. Because we are tied to a coal agreement, we cannot shift if the coal deteriorates in quality. Which has been happening now,” he said.
*Carin Smith –

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