Published On: Tue, Dec 1st, 2015

Eskom ends Exxaro coal supply contract


Eskom headquarters

JOHANNESBURG, (CAJ News) – ESKOM will not renew its decades-long contract with Exxaro when it expires at the end of the month.

It is thus seeking coal bids for its 100 megawatt (MW) Arnot plant.

This brings to an end a 40-year relationship.

Eskom has a cost-plus contract with Exxaro for the supply of coal to the Arnot power station.

The parties have been in ongoing discussions from as early as 2013 about the challenges that the Arnot Mine has in meeting its production targets, and its high cost of production.

“Despite various meetings and commitments, Arnot Mine has still not been able to meet its production targets and Exxaro has not been able to address these issues. This has forced Eskom to allow this contract to expire and to seek an alternative supplier at a lower price,” said Eskom.

It said as a state-owned company, it was mandated by the national government to ensure security of electricity supply whilst contributing to the socio-economic development of the country.

“Part of this responsibility is ensuring that Eskom continues to support local businesses in a cost-effective manner.

“Eskom has entered into coal supply contracts with various suppliers. All of these suppliers are required to operate within the agreed contractual terms which include production and cost targets.”

The Request for Proposal (RFP) for Coal Supply for Arnot power station was initiated in August through a public procurement process.

As this RFP was a public process, Exxaro had the opportunity to submit its bid just like any other potential supplier.

“The RFP is currently being evaluated and the winning bidder(s) will be announced once this process has been completed. Eskom continues to engage with Exxaro in line with contractual obligations, however, this will not be at the expense of taxpayers,” Eskom said.

Meanwhile, the power system is currently stable with no load shedding anticipated on Tuesday.

CAJ News

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