Gupta mines undersupply coal as Eskom puts brave face on downgrade | Fin24
 
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Gupta mines undersupply coal as Eskom puts brave face on downgrade

Mar 30 2018 14:42
Paul Burkhardt, Bloomberg and Fin24

State-owned power utility Eskom said it’s running low on coal at six stations as mines owned by the Gupta family failed to meet their contractual supply obligations.

The Optimum and Koornfontein mines, which supply Eskom plants, are owned by companies linked to the Guptas that were placed under administration last month after banks suspended services.

While the utility said there’s sufficient stockpiles at most of its power stations, the operational issue comes as it faces substantial financial difficulties of its own.

“Currently, stockpiles at 6 stations, Arnot, Camden, Hendrina, Majuba, Tutuka and Komati, are low,” Eskom said in an emailed reply to questions.

Additional coal contracts for the all stations “are being concluded and will add to the current supply,” it said.

Some workers at the Optimum mine have not been paid on time, according to the National Union of Mineworkers. The labour group has urged business rescuers to sell the mines to avoid exposing employees to further uncertainty.

“Optimum and Koornfontein are not supplying as per their contractual obligations and Eskom will follow the remedies as per the coal supply agreements to address undersupply,” Eskom said. “The utility is awaiting the finalisation of the business rescue plan.”

'Lack of clarity' on turnaround plans

Eskom on Thursday had its credit rating downgraded by Moody’s Investors Service, which cited a lack of clarity regarding the South African power utility’s plans to stabilise its finances.

Moody's downgraded the power utility's credit ratings from B2 from B1, citing an absence of concrete plans to place its business on a sound financial footing.

B2 is the fifth rung of sub-investment grade debt.

Despite acknowledging that after Eskom's board was replaced in January it had obtained sufficient short-term funding to address a looming liquidity crisis, Moody's said that conditions at the company remain "challenging".

The ratings agency said in its ratings action that, despite some improvement in the company in relation to corporate governance and liquidity, there is stilll "limited visibility at this juncture as to Eskom’s plans for placing its longer-term business and financial position on a sustainable footing."

Moody's said former finance minister Malusi Gigaba's budget "did not provide for any tangible financial support, as the government has demonstrated on prior occasions when the company has been under stress".

However, Eskom interim group chief executive Phakamani Hadebe said that despite the disappointment, "the future looks promising".

"We have addressed the liquidity issue and other key challenges. The new board and Eskom leadership are swiftly moving into the second intervention stage by formulating an integrated strategy that will yield favourable results," he said.

"The positive sentiments expressed by Moody’s encourage us to work even harder to ensure the execution of this strategy. I am confident that we will stabilise the credit profile of Eskom and improve its credit rating.”

moody's  |  eskom  |  gupta family  |  downgrade  |  energy  |  coal
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