Eskom, Exxaro war over Arnot Mine escalates

In the one corner...

Eskom issued a statement on 3 March saying that Exxaro was given notice on 8 September 2015, informing the latter that its 40-year contract to supply coal to the Arnot Power Station came to an end on 31 December 2015, and Eskom wouldn’t be renewing.

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According to the statement, Eskom said that it was not responsible for the closure of the mine as implied by Exxaro, but it had, in fact, been engaged in discussions with the mining company for two years about the high price of the coal it supplied.

It added that Exxaro did not have to close the mine – which meant a loss of jobs – but should explore its options for other contracts.

Eskom Group Executive for Generation, Matshela Koko, said: “We have been engaging in a multi-stakeholder forum with all affected parties including the Department of Mineral Resources and organised labour in a bid to save jobs. However, Exxaro has the option to continue with the mine without an Eskom contract, which would save jobs.”

In the other corner...

Meanwhile, Exxaro believes that the power utility is responsible for the costs of closing the mine including retrenchment packages.

“Arnot mine was developed as a tied mine. Therefore, in terms of the coal supply agreement, Eskom is required to provide the capital to fund sustaining and expansion expenditure to the mine,” Exxaro said in an article on iol.com.

“This includes making available sufficient reserves to ensure the supply of coal for the life of the power station.”

“Further, the coal supply agreement holds that upon termination of the agreement Eskom should pay all costs associated with closure of the mine and making good the deficit in the rehabilitation trust fund,” it continued.

Back to Eskom…

Koko said: “Our finances are under pressure and we have been reviewing our cost-plus contracts in order to contain our primary energy costs. We will retain those that make financial sense and disinvest in those that no longer give value to Eskom.”

“Exxaro’s revised coal-supply agreement contract that was submitted to Eskom in February 2016 promises to halve the costs per tonne for Eskom, but lacks substance and commitment on their part. Eskom has responded to this proposal and awaits a more substantive proposal from Exxaro. It is therefore not in Eskom’s interest to make a multi-billion rand decision based on a graph in a letter that excludes detail on capex costs and a proper life of mine plan,” said Koko.

Arbitration between Eskom and Exxaro continues.