South African power utility Eskom reported in early December that it had made “good progress” in its negotiations with Anglo American Inyosi Coal regarding a coal supply agreement for the Kusile power station, which is being built in Mpumalanga.

Outgoing CEO Brian Dames confirmed that progress had been slower than initially sched- uled, but that discussions were advancing towards a position where teams from both sides could move towards finalising the agreement.

Not an Issue Dames said 51% black eco- nomic-empowerment (BEE) participation in the deal was “not an issue” but rather a “requirement”, and that Eskom was, in fact, keen for even higher levels of BEE involvement.

“We have always had the strategy of making sure that we find the commissioning coal, and that we have well on track. We are now working with Anglo to make sure that we conclude that supply agreement,” Dames said.

In parallel, Eskom was pushing ahead with its coal-sector transformation plan, which was unveiled to the market in December 2012. Through the plan, Eskom aimed to use its procurement muscle to develop new BEE mining companies.

The emerging-miner strategy also formed part of a larger initiative to deal with the utility’s so-called ‘coal supply cliff’, which could result in yearly shortfalls of up to 40-million tons from 2018, as existing medium-term contracts expired and production at some of the older tied collieries declined.

Divisional executive Kannan Lakmeeharan reported that the strategy had several pillars, includ- ing the immediate conclusion of supply contracts with emerging miners.

“Eskom has made significant progress, and in the last two years, over R15-billion worth of contracts [have been concluded] and the annual spend has gone up to about R3-billion.”

He added that favourable prices and quality had also generally been secured, but did not provide specifics.

Creation of Fund

Another key pillar related to the creation of a fund to support emerging miners, for which a concept plan had been finalised.

Public Enterprises Minister Malusi Gigaba would share details about the fund in due course. But it is anticipated that the fund will be used to assist new black miners in dealing with prevailing constraints to exploration and development, as well as access to resources, skills and logistics.

Various other levers were also being pursued, including using Eskom’s access to export quotas and working with existing sup- pliers to support their transformation objectives.

Regarding the contentious issue of possibly declaring coal a strategic resource to shore up domes- tic supply ahead of export, Lakmeeharan stressed that Eskom was not aiming to restrict exports, but to “make sure that the domestic needs of South Africa are met at a reasonable price, which is cost plus a fair return”.

“It’s about having a fair balance,” he argued.