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Johannesburg - The main reason behind South African state electricity firm Eskom's request for a 53% tariff increase was the price of its main raw material, coal, chief executive Jacob Maroga said on Tuesday.
"The biggest contribution to the current price application is the primary cost of coal...But we have not stopped the purchase of coal due to financial considerations," he told a media briefing.
Maroga said the requested increase was prudent given the high cost of coal. The national energy regulator will rule on June 6 on Eskom's request.
Public enterprises inister Alec Erwin said last week Eskom's tariff increases should be smoothed out over five years.
About a quarter of coal being used at South Africa's state-owned utility Eskom was based on the more costly short-term contracts and the company had 17.4 days worth of coal in stock at its power stations, Maroga said.
"Overall the cost of short term contracted coal is much higher and 25% of our coal that we use is based on short term contracts," he told a media briefing.
"We wanted to go into winter at 20 days, currently we are at 17.4 days, and it is still improving," Maroga said, adding there was no plan in place to divert export coal to the local market.
Eskom has been battling with electricity shortages and in January started rolling power outages that shut the mining industry down for five days.
Eskom plans to spend about R350bn over the next five years on generating capacity as it struggles to meet growing demand in Africa's biggest economy.
Government will assist
The government said it would offer Eskom R60bn in assistance over the next five years.
Maroga said seven units at its Camden station would return to service by the end of the year.
"We are just about to finish the first station which is Camden and we are starting on the second station which is Grootvlei, so we are in a rhythm," he said.
International ratings agency Moody's on Tuesday placed Eskom's ratings on review for a downgrade, and said it might cut the company's rating on potential negative effects from tariff increases.
A dealer said Eskom bonds were little changed after the Moody's news.
"There hasn't been a trade yet since the announcement. There hasn't been any effect at all," an Eskom bond trader said.
- Reuters