On Tuesday, Eskom Group Executive for Generation, Matshela Koko, said that it is unacceptable that coal from New Denmark Colliery is more than double Eskom’s average cost of coal, and possibly one of Eskom’s most expensive coal contracts.
New Denmark Colliery overcharging
In a company statement, Eskom said that the total cost to the utility for coal from New Denmark Colliery, which is supplying Tutuka Power Station in Mpumalanga for April 2016 and May 2016, was ZAR1,600 ($109) per tonne.
This includes the total costs of operating a mine as well as the amortisation costs of historical capital expenditure, the utility highlighted.
Securing strategic contracts
The investment in New Denmark Colliery was done on a cost-plus basis with an intention of providing a strategic advantage to the utility and the country in relation to security of supply, and pricing.
However, the parastatal said that this arrangement is currently not yielding the intended benefits.
The state-owned power company therefore urges Anglo American to radically change the performance of the mine to be in line with intended expectations.
Anglo American was quoted in the media as saying that it charges the utility ZAR668 ($45) per tonne, which means that even if this was correct, the price would still be high as this is more than 70% above Eskom’s average price of coal.
Exxaro Arnot Colliery
In a recent media battle between local media and the utility, over ‘sensationalist’ reports regarding the utility’s coal contracts, Eskom Chairman Dr Baldwin (Ben) Ngubane said that the Exxaro Arnot Colliery had a contract with Eskom to supply coal to Arnot Power Station for 40 years.
This contract expired in December 2015. The cost of coal at date of expiry was ZAR1,132 ($77) per tonne.
“I am advised that Tegeta now supplies Arnot at an average price of ZAR500 ($34) per tonne. The unit cost of coal supplied under this contract is at a discounted rate of 3%, resulting in a further saving to Eskom of billions of rand in an eight month period and ultimately, the consumer.”
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