Eskom clashes with Treasury over plan to hike coal prices
Eskom wants to increase the price it pays for coal delivered by South32 to its Duvha power station despite the National Treasury opposing the idea.
This is according to a report by The Sunday Times, which cited sources with knowledge of the transaction.
Last year, Treasury rejected Eskom’s request to award South32 a R66-billion coal contract which would see Eskom pay R478 per ton.
Eskom currently pays South32 R416 per ton of coal, but now it reportedly aims to hike this price to more than R600 per ton for a further 10 years, defying Treasury’s recent rejection.
Eskom CEO Andre De Ruyter argued that South32 offered a competitive price and feeds the Duvha power station via a 6km conveyer belt, which reduces transport costs.
He said that if Eskom does not get a constant feed of coal from the South32 mine into Duvha, load-shedding is almost certain.
“Duvha is a mine-mouth operation, and the coal-handling facilities are such that if we don’t get a consistent feed of coal from the mine, we have to shut down three of the five units. And that means a loss of 2,000MW,” De Ruyter told The Sunday Times.
“So it is dead certain that we will have load-shedding if that is what happens.”
Load-shedding trouble
Eskom recently announced that stage 2 load-shedding would continue over this weekend and may be extended into next week due to the utility’s lack of power generation.
The company has been burning emergency fuel reserves constantly and needs time to replenish these, but further breakdowns at power plants mean it has no opportunity to do so without load-shedding.
The load-shedding outlook for 2021 is not good, especially when considering last year’s figures.
A recent study by The Council for Scientific and Industrial Research (CSIR) found that load-shedding occurred for 859 hours of the year (9.8%) despite a reduction in demand during the national COVID-19 lockdown.
The study attributed the increase in load-shedding to Eskom’s plummeting energy availability factor (EAF), which measures plant availability including planned maintenance, unplanned breakdowns, and energy losses not under plant management control.
“Eskom fleet EAF is on a declining trend and drove load-shedding events in 2020,” the CSIR said.
Eskom’s fleet EAF has declined to an average of 65% over 2020, hitting the lowest point in the year on 31 December.
In 2021, Eskom’s EAF has become even worse, which means load-shedding is likely to continue provided demand and capacity remain similar.
According to Eskom’s latest weekly generation availability report, the average EAF for the year to date is only 58.55%.
This may have been a significant factor in the recent implementation of stage 2 load-shedding as a result of the continued need for the power utility to burn emergency fuel.
The CSIR did not provide any specific predictions on load-shedding risk for 2021, but Eskom’s declining EAF spells bad news for South Africans.
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