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Eskom laments poor quality of coal

31st January 2019 BY: Kim Cloete
Creamer Media Correspondent
Photo by: Creamer Media

Eskom COO Jan Oberholzer has called on coal mining companies to "play ball" and improve the quality of the coal they supply to the utility.

He has also outlined the massive challenges facing the utility and said Eskom was holding out for the National Energy Regulator of South Africa (Nersa) to approve its latest application for tariff increases of up to 15% a year over the next three years.  

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Oberholzer told the fourteenth annual Southern African Coal Conference, in Cape Town, that coal stock levels had improved to 29 days as of this week, but that the quality of coal was poor.

“We have managed to get out of the undesirable position of insufficient coal, but the quality is not good. Currently there is a 1 000 MW impact, because of the quality of coal.

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“Our mining colleagues are not playing ball. I am requesting you, if you supply to Eskom, understand your responsibility to this country. If we have coal supply agreements, agree to what we have agreed and what we have paid for, otherwise it has a negative impact on the country.”

Coal stocks dropped to a low around October and November last year, but have increased since then. 

“We believe contracts placed will soon take us above the minimum levels required for the majority of power stations,” said Oberholzer.

At this stage, several power stations are below minimum levels, while three power stations had coal stocks which would last less than ten days.  

Oberholzer said 41 contractual agreements had been placed with companies since last year, while another seven contracts were imminent.

Oberholzer did not rule out the possibility of further load-shedding, saying some of Eskom’s power stations were not performing at optimum level and were "very unreliable and unpredictable" at times.

“Medupi and Kusile, but especially Kusile, is not giving us the megawatts that we have invested in, so we have significant challenges. So unfortunately, in terms of load-shedding, the risk remains.”

Eskom had to resort to load-shedding at the end of last year.

Asked about the long-term future of coal, Oberholzer said the Eskom board had approved a long-term coal strategy, which included investing between R10-billion and R12-billion in coal mines.

“By doing that, you make sure you get the right quality of coal.”

Oberholzer also called on government to speed up its efforts in getting municipalities to pay the money they owe Eskom for electricity. He said municipalities owed the utility R18.6-billion.

“The President put together an inter-Ministerial task team. From an Eskom point of view, there hasn’t been enough movement from government to support us.”

“We are not making headway. It is a big issue.”

He said while the R18.6-billion did not seem large compared with Eskom’s overall debt, it was putting further pressure on Eskom.

“The CFO has to get R70-billion this year alone for us to run our operations. We need to go into the world and borrow. The money is not coming in as it should be, so the debt is just getting bigger and bigger and bigger.

As an option, he suggested that Eskom could intervene in the situation with municipalities.

“From a legal point of view, maybe what we need to do is go in and take over the revenue collection.”

Elaborating further on the financial difficulties facing Eskom, Oberholzer said the utility had debt in excess of R400-billion.

“Coal prices are moving rapidly upwards. We have a salary bill that is extremely high and municipalities are not paying for the commodity we are selling to them.”

He said Eskom needed to fix its operations and was also hoping for tariff increases from Nersa that would make a dent in its debt.

“We understand the sensitivity and importance of tariff increases in the country. But [whatever] Nersa allows for tariff increases, will determine how we repay our debt.”

In terms of the new Eskom strategy, he said management had developed a model and presented it to the board in the middle of November.

“We are still waiting for the government to come back and say which direction we need to take.” He said a Presidential task team had been interacting with Eskom and he hoped President Cyril Ramaphosa would give some direction on the utility during his State of the Nation address in February. 

EDITED BY: Creamer Media Reporter
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