HomeIndustry SectorsFinance and PolicyExxaro and Eskom reach agreement on Medupi coal supply delay

Exxaro and Eskom reach agreement on Medupi coal supply delay

30 August 2013 – With Eskom’s recent announcement of the Medupi power station construction being delayed by six months resulting in unit six only expected to supply electricity to the grid in the second half of 2014, the company contracted to supply coal to that station, Exxaro, confirms that the parties have reached an amicable agreement to deal with this delay.

Construction on the Grootegeluk Medupi Expansion Project (GMEP), to supply the Medupi power station with 14.6 million tonnes per annum, continues to progress on time and within budget and is 96% complete. The capital expenditure on the project to date is R8.9 billion with total capital expenditure for the project still forecast at R10.2 billion. The major construction contracts are expected to be completed during the second half of 2013.

In terms of the contractual arrangement between Exxaro and Eskom, following Eskom’s recent announcement of the delay in the completion of the Medupi power station, Eskom has the option to defer the commencement of coal deliveries to the Medupi power station from March 2013 to the first quarter of 2014. The subsequent rate of coal deliveries will then be increased to take the full volume of the deferred coal over a period of 24 months prior to
December 2016. There is no adverse financial impact on the parties in the long run in terms of the revised agreement. The coal supply ramp-up therefore did not commence during the first half of 2013 as scheduled. However, the ramp-up completion date remains scheduled to continue until 2016.