CEO: Eskom aware of coal weakness

2009-09-12 11:00

Johannesburg - Eskom was aware of weaknesses in its coal contracts before it received a report warning about its stockpiles, the parastatal's CEO said in Johannesburg on Friday evening.

Jacob Maroga was responding to allegations in energy consultant Susan Olsen's report of July 2007 which had been handed by the DA to Parliament's portfolio committee on energy.

Olsen is a partner at Wingfield Consultancy, a well-known oil and coal research group in Boston, Massachusetts. Her report deals with irregularities in the supply of coal to Eskom, which the DA says demonstrates glaring oversight failures on the part of the electricity supplier.

Maroga acknowledged receiving the damning report from Olsen, but said this wasn't the first time Eskom became aware of the challenges around coal.

He had passed the report on to two managers.

According to Maroga, Eskom began seeing challenges in supplying power in 2005 when one of Koeberg's units failed.

"This illustrated the vulnerability of our system," he told a press briefing, adding that Eskom knew then there were reserve margin problems at national level.

According to the parastatal's CEO, coal challenges revolved around both pricing and logistics.

In late 2007, however, load shedding had occurred, largely as a result of generation plant shortage and performance, and then coal prices and availability became a problem.

Leadership changes

Maroga acknowledged that around the time of the January 2008 energy crisis in the country there had been low coal stockpiles and problems with wet coal. As a result, he had made leadership changes in Eskom's primary energy division.

"I created two new positions. We now have 40 days of coal stockpiled and we haven't had load shedding since April 2008."

After load shedding on January 24, 2008, Eskom had gone through a recovery process, "but we have not fully recovered from issues relating to primary energy".

Eskom was exposed to various risks regarding coal - such as road transport of coal in Mpumalanga.

At present the system was still under pressure and Maroga admitted that if the economy was to stage a quick recovery, risks would deepen.

'The coal is there'

Addressing Olsen's allegation that Eskom appeared to be entirely incapable of managing the procurement of coal, Brian Dames, chief officer generation, said Eskom was working hard on cost aspects of coal.

"We have engaged with the mining companies, they have been very supportive. We want longer-term contracts and a better quality of coal."

Dames said coal transport by road was not sustainable and Eskom had to consider how it could engage players like Transnet.

The restructuring of the primary energy team was ongoing.

Dames explained that in the long-term the country didn't have enough mines to supply Eskom.

"The coal is there, it's just a matter of getting it out of the ground."

- SAPA