The Optimum mine supplies Eskom with 5.5 million tonnes of coal per annum at a cost of ZAR150 per tonne

In South Africa, the national power utility, Eskom, has stressed that it will not pay Anglo–Swiss multinational commodity trading and mining firm, Glencore, more than what was agreed in the original 25-year power purchase agreement (PPA).

In September, the two firms signed a temporary supply contract following a round of negotiations, stipulating that Eskom could continue paying the original amount of ZAR150 ($11) per tonne.

With the contract due to terminate on 30 November 2015,  Eskom Group Chief Executive, Brian Molefe, said this week that the utility will not pay a cent more should the original contract see out it’s remaining three years.

In an interview with Reuters, Molefe said: “A contract is a contract.”

Coal mine at a loss

In August, business rescue practitioners at the Mpumalanga-based Optimum coal mine, revealed that it was under financial strain as a result of the firm selling coal to the utility for less than the cost of production.

They advised that the existing 25-year coal-supply agreement with Eskom’s Hendrina power station would be put on hold until a resolution was met.

In September, the two firms agreed to recommence supply until an optimal and sustainable solution for both parties was met.

The Optimum mine supplies Eskom with 5.5 million tonnes of coal per annum, contributing 2,000MW to the national electricity grid. Legally it is still bound to the PPA for another three years.