Eskom has indicated its concern regarding media reports revealing the potential closure of Exxaro’s Arnot coal mine and the resultant job losses should Eskom not extend Exxaro’s contract to supply coal to the Arnot power station.
Eskom has a cost-plus contract with Exxaro for the supply of coal to the Arnot power station, which expires in December 2015. The parties have been in on-going 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.
Eskom says it has been forced to allow the contract to expire because the mine is unable to meet its production targets and Exxaro has not been able to address these issues.
Subsequently, Eskom is also seeking an alternative supplier at a lower price.
The Request for Proposal (RFP) for Coal Supply for Arnot power station was initiated in August 2015 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 it states in a press release.
Eskom says Exxaro has the sole decision on whether it closes Arnot or not.
Eskom is focused on driving socio-economic development whilst retaining jobs. As such, Eskom is deeply concerned about the reported potential closure of this mine and the potential loss of jobs. However, it (and the country) cannot afford to continue buying coal at R900/t.