Eskom responds to media reports regarding Arnot mine closure
Tuesday, 01 December 2015: The power system is currently stable with no load shedding anticipated today.
Eskom is deeply concerned about the recent media reports regarding the potential closure of the Arnot coal mine and the resultant job losses that might follow if Eskom does not extend Exxaro’s contract to supply coal to the Arnot power station.
As a state-owned company, Eskom is mandated by the national government to ensure security of electricity supply whilst contributing to the socio-economic development of the country. Part of this responsibility is ensuring that Eskom continues to support local businesses in a cost-effective manner.
Eskom has entered into coal supply contracts with various suppliers. All of these suppliers are required to operate within the agreed contractual terms which include production and cost targets.
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 ongoing 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. Despite various meetings and commitments, Arnot Mine has still not been able to meet its production targets and Exxaro has not been able to address these issues. This has forced Eskom to allow this contract to expire and to seek 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 is important to note that Exxaro owns Arnot Mine and therefore it has the sole decision on whether it closes it 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, Eskom and the country cannot afford to continue buying coal at R900/ton.
Finally, Eskom views the leaking of confidential information as irresponsible and reserves its rights to take appropriate action.
Statement issued by Eskom, 1 December 2015
