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Load shedding: Eskom calls Glencore's bluff

Cape Town – Eskom has brokered a 60-day deal with Glencore [JSE:GLN] to supply coal to the Hendrina power station, while talks continue to break the two company’s impasse.

Glencore’s administrators suspended its agreement to supply coal on 21 August as the South African subsidiary undergoes a financial rescue programme.

Eskom acting CEO Brian Molefe said on Friday that Glencore had to stick to its contract to supply coal at R150 per tonne and repay Eskom fines it had incurred, which he said were over R2bn.

Glencore’s Optimum Coal Mine, which produces 10 million tonnes a year, is under financial strain because it was selling coal to Eskom for less than the cost of production, reported Reuters.

Molefe told media in Cape Town that he met with the administrators on Thursday night and found a way forward, while talks continued.

“I told them last night that we have found coal and we have bought coal cheaper than theirs,” said Molefe. “I told them we are going ahead without them and not implementing load shedding."

Eskom has not implemented load shedding for 27 consecutive days. 

“This morning they started supplying coal at the contracted price,” he said.

Molefe said he believes Glencore was hoping Eskom would battle to power the 2 000 megawatt power station and concede to its demands. “I think they were hoping we would do load shedding, but we didn’t,” he said.

“We agreed with Glencore last night that they will continue to supply Hendrina mine at the contracted price for the next 60 days, while we look for a solution to the impasse,” Molefe told Fin24.

“They’ve been mining and stockpiling the coal,” he said. “They’re just not giving it to us.”

AUDIO: Interview with Brian Molefe


Eskom won’t concede to Glencore price demands

Molefe said that Glencore suspended its contract after Eskom refused to budge on a new price.

“The price that the turnaround manager wanted was R513 per tonne compared to our current R150 per tonne,” Molefe told Fin24.

“They said if we don't change a price they would stop supplying coal,” he said.

“I am quite confident that we cannot be blackmailed into a situation where the supplier of coal will force us into any price at Hendrina,” he said.

“We will pursue all the damages that have been caused by this deviation from this contract,” he said. “We will pursue our legal rights.”

Coal contracts are coming up and Eskom’s preference is not for cost-price but for fixed-price contracts.

“They are more transparent and give you more flexibility over time,” Molefe told a War Room briefing. “They don't open you up to unintended consequences like Optimum.

Glencore restarted supplies to help negotiations

Louise Brugman, spokesperson for Optimum's business rescue company, confirmed news that it had resumed its supplies.

"The business rescue practitioners have agreed that Optimum Coal Mine will supply Eskom with coal during the negotiations at the base price of approximately R150 per tonne and have secured financial support from Glencore for this purpose," Brugman said.

Piers Marsden, a Business Rescue Practitioner, said: "The recommencement of supply is intended to allow for meaningful negotiations to find a sustainable solution for all parties."   


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