Joint business rescue practitioners, Piers Marsden and Peter van den Steen on Thursday informed Eskom that they have suspended the coal supply agreement with Glencore’s Optimum coal mine for the duration of the business rescue proceedings.
This is in accordance with section 136 of the Companies Act.
Consequently all coal supply from Optimum into the Hendrina power station has now been suspended.
The business rescue practitioners are obligated to minimise the immediate cash losses incurred by Optimum, in order to provide sufficient scope and time for the business rescue practitioners to develop a business rescue plan for Optimum.
Marsden noted, “Suspending onerous contracts is a mechanism that legally entitles business rescue practitioners to release the company under business rescue from loss making contracts and in this case is a necessary recourse if we are to have any prospect of rescuing Optimum Coal”.
Optimum provides 100% of its coal directly off its conveyer belts into the Hendrina power station.
As an interim measure in order to ensure that Eskom has sufficient coal for the Hendrina power station, the business rescue practitioners have offered to supply coal to Eskom at Optimum’s cash cost of production.
“The quality of the coal being offered is consistent with the quality of coal that has been supplied to Eskom and used by Eskom over the last number of years.
We hope this interim agreement is a viable solution which will enable the parties to negotiate a long term contract that will facilitate the sustainable supply of coal to Hendrina into the future.”
“We believe that it will be in the best interests of all parties for a new agreement to be concluded between Eskom and Optimum mine, because if Optimum mine is forced into liquidation it will result in interrupted coal supply to Eskom, job losses and other negative consequences and ultimately could result in substantially higher costs for Eskom”, concluded Marsden.