After two years of talks and disagreements on its 40-year-long coal supply agreement, Eskom has confirmed that the pair’s longtime coal deal will not be renewed. The existing contract was due to expire this month, and Eskom confirmed this week that it would no longer take coal as of December 31. Earlier this year, Eskom told Exxaro that the price for its coal, which Eskom used to fuel its Arnot power plant, was too high. Despite entering into a memorandum of understanding (MoU), negotiations dissolved; subsequently, Eskom advised Exxaro to commence closing the Arnot mine.
Eskom has been reportedly tightening its restrictions on CSAs because initial agreed-upon costs are now less sustainable. Some media reports indicated Exxaro was charging R900 per metric ton (mt) or $62.62/mt.
“We have been in discussion with Exxaro since 2013…they have not been able to supply us with the number of tons we had agreed to, yet they continued to charge high prices,” Eskom spokesman Khulu Phasiwe told Reuters. “Our plan is to exit from all our cost plus mines contracts and move to a buyer of coal and not a mine owner.”
Eskom officials noted in its confirmation of the plan this week that it is continuing discussions with the company to reach a joint closure solution. “We are conscious and concerned about the potential for negative consequences on Arnot mine employees,” the company said.
Eskom, which is also in a dispute with Glencore’s Optimum division in South Africa for a similar reason, will bid out a new contract, though officials did not provide a plan for timing.