Eskom’s position on Exxaro’s statement regarding closure of Arnot mine
‘Exxaro has the option to continue with the mine without an Eskom contract, which would save jobs.’
Eskom notes Exxaro’s statements in the media, particularly with regard to Arnot Mine and the previous coal supply contract with Exxaro for Arnot Power Station. Eskom re-iterates that the 40-year coal supply contract with Exxaro for Arnot Power Station came to the end of its life on 31 December 2015. Eskom courteously reminded Exxaro of the expiry date of this contract in a letter dated 8 September 2015.
It is regrettable that Exxaro, the owner of the mining rights, decided to close the mine without fully exploring economically viable options. Over the past two years, Eskom engaged with Exxaro highlighting the high cost of coal from Arnot Mine and the need for Exxaro to consider viable options to reduce this cost for the benefit of the South African consumer.
Exxaro’s decision to close the mine has an impact on jobs, amongst other matters. It is disappointing to note that Exxaro has, over time, given an impression that it was Eskom’s decision to initiate closure of the mine, which is not true.
Eskom Group Executive for Generation Mr Matshela Koko says, “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.”
“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,” says Mr Koko.
Arbitration between Eskom and Exxaro continues and some issues raised by Exxaro are premature as they are subject to the current process. It must also be noted that Exxaro had an option to respond to the request for proposal (RFP) for the Arnot coal supply contract issued by Eskom in August 2015 and they elected not to respond.
Eskom remains committed to exploring economically viable solutions, however, not at the expense of the South African consumer.