Eskom faces coal conumdrum

Johannesburg - South Africa's power utility Eskom faces considerable pressure to sustain long-term coal supplies, its CEO said in remarks broadcast on Saturday.

"Now we are doing the long term. It is by no stretch of the imagination complete. It is still a big issue. The whole issue of the availability of coal long term. The price and the logistics," said Jacob Maroga.

The global economic crisis badly hit the utility's ability to borrow and Eskom was forced to buy coal on more expensive short-term contracts to boost supply during last year's crisis.

Eskom has said the country would need to invest up to R110bn in coal mining by 2020 and build at least 40 new coal mines in that time.

Eskom, which provides 95% of the country's power, has been battling an electricity shortage since January last year, and has applied for a 34% increase in tariffs to build new power stations to plug a supply shortfall.

Responding to allegations in a 2007 report by Susan Olsen of U.S.-based oil and coal research group Wingfield Consultancy, which warned of low stockpiles in South Africa, Maroga said: "There were issues, certain issues we had to deal with such as stockpile recovery, which was done."

South Africa is one of the world's major coal exporters, but regular train derailments and delays along the Richards Bay coal line have dented business confidence in freight logistics group Transnet's ability to meet international commitments.

"We now have 40 days of coal stockpiled and we haven't had load shedding since April 2008," SAPA news agency quoted Maroga as saying.

To fire its power stations, Eskom will require 180 to 200 million tonnes of coal a year from 2018, up from 120 to 130 million tonnes at the moment, it said.

In August, Eskom reported the biggest full-year loss in the company's history and warned power supply was still tight despite a decline in usage.

- Reuters