JOHANNESBURG: South Africa's power utility Eskom said on Tuesday it was seeking coal bids for its 2,100 megawatt (MW) Arnot plant, after it notified Exxaro that it would not automatically renew a 40-year-supply contract which ends in December.
The cash-strapped Eskom is cracking down on its contracts with coal suppliers, saying that previous agreements where the utility paid for the running costs of mines for guaranteed supply of coal at a pre-determined price were no longer sustainable.
"We have been in discussion with Exxaro since 2013. They have not been able to supply us with the number of tonnes we had agreed to, yet they continued to charge high prices," Eskom spokesman Khulu Phasiwe told Reuters.
Exxaro could bid for the new contract but Eskom, which is facing a funding shortfall of 200 billion rand ($13.88 billion), said it could no longer afford to pay 900 rand a tonne for coal, which it was currently paying the company.
"Our plan is to exit from all our cost plus mines contracts and move to a buyer of coal and not a mine owner," he said.
Exxaro said it would issue a response later.
Eskom and Glencore's South African unit, Optimum, are also embroiled in a dispute over the price of coal with the utility refusing to pay more than 150 per tonne of the fuel. Optimum has said this rate is less than the cost of production.
Eskom's fleet of coal-fired power stations produce virtually all the electricity in Africa's most industrialised economy.
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