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Glencore resumes supplying coal at contracted price

2015-09-04 10:25

Eskom acting CEO Brian Molefe, Public Enterprise Minister Lynne Brown and War Room representatives brief the media on what is happening in SA's War Room.


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Last Updated at 00:59
04 Sep 16:19

Eskom statement:

Eskom would like clarify the media interpretation around possible debt restructuring in the context of the funding statements made by Brian Molefe, Acting CEO this morning in Cape Town.  Molefe was indicating that within the funding cycle there will be greater opportunity to actively manage the liability profile of the company to optimize the debt portfolio. Eskom will continue to do this in the ordinary course of business.   In reassuring investors Molefe said, “Eskom remains cognizant and committed to its existing loan covenants and does not intend entering into any debt restructuring as suggested by the recent media comments". 

04 Sep 12:57
Eskom acting CEO Brian Molefe speaks about Glencore coal supplies resuming:

04 Sep 12:17
Brown: The 5-point plan is informed by two areas: strategy for immediate and short term interventions to limit load shedding; Eskom play development role in stage. We want to ensure that Eskom creates an improved plan that creates reliability of electricity and gives Eskom that space to do maintenance. We participate in building new projects, gas, coal and other regional projects. Need to instill public confidence and show that government is in control of situation.

04 Sep 12:15
Brown on the burden of load shedding: I hear from my father, who can’t watch Isidingo, to businesses who struggle with 2.5hrs load shedding. I really want to assure citizens, that through the integrated resource plan, we intend to diversify the energy mix.

04 Sep 12:14
Brown: When the country got to stage 3 load shedding, we decided to set up the war room to remove obstacles to deal with energy challenges. New build delays, maintenance, etc. and we had huge instability within the board at the time. (But I did not want the chair removed!)

04 Sep 12:13
Brown: Insufficient planning from government and Eskom in past 10 years compounded in energy challenges. The new build was delayed and, if built on time, it would have averted the current challenges (or it would have been just less).

04 Sep 12:12
Brown: We have managed to connect 11 million people from the previous 5 million people (pre-1994) on the grid.

04 Sep 12:03
Molefe: Unplanned maintenance at 7 000MW is very high. We will budget at 7 000 MW which is very conservative. You will see it coming down. We are catching up with risk maintenance with backlog maintenance and old station breakdowns.

04 Sep 12:01
Matsietsi Mokholo, Acting Director-General of the Department of Public Enterprises: Coal is a strategic asset.

04 Sep 12:00
Molefe: In 15 years time, the debate will change around energy. We will be able to supply an exponential amount of solar in 15 years time. Eskom does a lot of research in energy.

04 Sep 11:59
War Room's Malcolm Simpson says the War Room does not deal with nuclear power.

04 Sep 11:59
Molefe: We will meet them in two week's time to determine the way forward.

04 Sep 11:58
Molefe: Glencore (Optimum) owes Eskom R2bn in penalties.

04 Sep 11:57
Molefe: I told them last night we have found coal and we have bought coal cheaper than theirs. I told them we are going ahead without them and not implementing load shedding. This morning they started supplying coal at the contracted price. Glencore has been supplying Hendrina.

04 Sep 11:56
Molefe: The coal contracts are coming up. Our preference is not for cost-plus but for fixed-price contracts. They are more transparent and give you more flexibility over time. they don't open you up to unintended consequences like Optimum. They said if we don't change a price they would stop supplying coal. They insisted on collecting penalties. They thought if we said they would shut mine if we don't increase payment from R150 per tonne to R530 per tonne.

04 Sep 11:54
Molefe: Our nuclear fuel contracts in 2017 are running out for Koeberg. We have time to negotiate new contracts and get new supplies beyond contracted period.

04 Sep 11:45
"We are not too concerned about our ability to borrow in the markets. We will be able to fund the capital programme as well as our operational expenditure," Brian Molefe said (Reuters).

04 Sep 11:45

Molefe: R72.4 bn of the funding is 95-100% signed and committed:

04 Sep 11:44
Molefe: Our main focus is to get the borrowings in. We will issue bonds in a more structured way. We will swap debt into a yield choice that works for us.

04 Sep 11:43
Molefe: The cost of generation nuclear electricity over its life will be covered the building of it.

04 Sep 11:42
Molefe: Nuclear is the cheapest once it has been built. Koeberg is the best performing with regard to cost. It is bringing down the cost of electricity.

04 Sep 11:41
Molefe: The future benefits of building nuclear power plants will far outweigh any negatives from their cost of building.

04 Sep 11:40
Molefe: When the new build project started it was only three units, now we have 12 units.

04 Sep 11:37
Brown: The game plan has changed. Brian Molefe was in for two weeks, when he sent his top management into the power stations. I feel far more confident about the timelines now. I had to be absolutely sure that Medupi Unit 6 was 100% online before phone President Zuma to come to the opening.

04 Sep 11:35
Molefe: We will not shift these new build deadlines ever again.

04 Sep 11:35
Molefe: When I referred to Medupi meeting its deadline, I was not referring to its original date, I was referring to the dates that I was contracted to deliver on.

04 Sep 11:34
Brown on Ismo Bill: The Ismo Bill was meant to break up distribution and generation and transmission. Eskom in its present state, I don't think can actually happen. The Ismo Bill will come back once we know what the energy path, the price of electricity and what the energy mix is. The president said it will come back, but it hasn't come to me yet. The IRP is in the Department of Energy. We have not seen the new processes yet. I hope to see it in the War Room. Of course IRP has to be updated. Things have changed fundamentally.

04 Sep 11:30
Brown: A number of issues around build programme (Medupi/Kusile). It took a year to plan for Medupi/Kusile. It took 5-7 years to plan for those plants in Europe. When it was realised there was not enough generation or supply to meet demand in 2005,6,7 it became an issue to build these plants. They are the largest plants in the world.

04 Sep 11:26
Molefe: Eskom has secured in loans for 2015/16 financial year, improving it's gearing.

04 Sep 11:23
Brown: Molefe sees talent and pulls them into Eskom’s projects.  

04 Sep 11:23
Molefe: With a few decisive interventions, we were able to deliver Medupi unit 6 eight days ahead of schedule. We believe we can deliver remaining projects ahead of schedule.

04 Sep 11:19

The next major milestone in Eskom's build programme is the synchronisation of Ingula Unit 3 in February 2016. See their full timeline:

04 Sep 11:18
Molefe: It's a principal we have realised we need - certainty.

04 Sep 11:17
Molefe: I was discussing this with my CFO this morning at 5am when we brain storm! Instead of getting big tariff increases now – we should ask for certainty. We need certainty of tariff increase as management. We should apply for a 10 year tariff increase. Nersa can give us a 10 year tariff increase and then they can go on holiday. It’s a thought for now.

04 Sep 11:17
Molefe: We have to borrow again if we don’t get tariff increases to fund activities. Whatever happens, we will find the money to fund the maintenance programme and for operational purposes at Eskom so we act responsibly.

04 Sep 11:16

04 Sep 11:16

04 Sep 11:15
These plans are subject to Eskom finding ways to avert load shedding. Molefe said it important for journalists not to write that there will be load shedding from May 2016. This live plan is like a game of Tetris, he says. All with the aim of doing maintenance and keeping the lights on.

04 Sep 11:13
Molefe: Question around Keeping lights on at all cost: It is too simplistic if you think you can only keep the lights on or have a maintenance at all costs strategy. We are trying to say for next year: we need the lights on and we need to do maintenance.

04 Sep 11:11
Brown: What we must determine in the board room - the decision to determine price increases lies with Nersa. We need to unlock the issue in the war room. the price pathing and energy path must be determined in the War Room.

04 Sep 11:10
Brown:The first thing Brian Molefe did as acting Eskom CEO was to send senior managers to power stations to project manage planned maintenance better.

04 Sep 11:08

Reuters filed this from the War Room briefing:

South African power utility Eskom expects the first 800 megawatts of power from its coal-fired power station, Kusile, to come online from August 2017, the power firm said on Friday.Besides Kusile, Eskom said in a statement that the next major milestone was the synchronisation of Unit 3 of the Ingula power station early next year, as Africa's most developed economy aims to overcome chronic power shortages.Public Enterprises Minister Lynne Brown said South Africa was not "out of the woods" yet, despite having had 25 days without power cuts.

04 Sep 11:07
Public Enterprises Minister Lynne Brown: The War Room is divided into two sectors: the technical division and the inter-ministerial committee.

04 Sep 11:06
The official maintenance plan for 2015/2016 with availability capacity and demand:

04 Sep 10:59
Molefe: Eskom engineers call the maintenance plan Tetris, because it's like playing that game when moving maintenance around to prevent load shedding.

04 Sep 10:57
Molefe: As more new build units come online, Eskom will be able to do more planned maintenance, which will improve stability of the overall system. Everyone at Eskom knows we can not have anymore delays.

04 Sep 10:56
Molefe: While it looks like we will have bad load shedding in May-July next year, we will ensure that doesn't happen by adjusting when we do maintenance.

04 Sep 10:55
Molefe says it is a sign of Eskom's state of stability that we have had 26 days of no load shedding, despite 900MW of Koeberg Unit 2 going down for maintenance.

04 Sep 10:54
Molefe: We will smooth out the maintenance plan to ensure that we fill in available gaps for maintenance to ensure we have capacity to meet demand.

04 Sep 10:53
Molefe: We announced this year when we did maintenance and load shedding for South Africans to be patient. I don't think we can do that again.

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