Eskom’s crazy coal deal

Eskom is set to buy five million tons of export-quality coal from Glencore’s Optimum Coal, a move which an industry expert has described as “the most crazy thing this past century”. This is according to a report in the Sunday Times.

The newspaper reported that Eskom – which is in the midst of a billion-Rand government bailout – plans to spend R3.76 billion a year on the coal, which is too high a quality to be used in its power stations.

“That coal is not suitable for Eskom use – it could be used if blended down,” said an unnamed industry expert.

The export-quality coal is expensive, and the blending-down process is costly, which raises questions as to Eskom’s intentions in purchasing the coal.

The Sunday Times stated that Eskom was “reluctant” to answer questions about the Glencore deal, saying the negotiations were confidential.

“[The deal] is still being negotiated and remains subject to approval by the Eskom and Optimum boards,” said Eskom.

Energy expert Chris Yelland said the potential deal was “a bit of a surprise”, and that Eskom may be struggling to secure coal supplies. The energy company says it will need 22 million tons a year going forward.

Eskom is also trying to have legislation put in place which would make coal a strategic resource, meaning import controls would be implemented when the electricity supplier needed it.

This news follows a recent report that many local coal mining companies are not black-empowered enough to supply coal to Eskom, which has caused fronting.

According to the report, Eskom requires companies to be at least 50% black owned to supply it with coal. The mining charter requires coal mining companies to be only 26% black-empowered.

The report also stated Eskom is forcing contractors at its new power stations to remain quiet about any problems, and issued them with confidentiality agreements which could see them fired if they spoke to the media.

The full report is available in the Sunday Times of 8 March 2015.

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Eskom’s crazy coal deal