Eskom: Coal stocks on the up

Eskom CEO Phakamani Hadebe told Parliament’s portfolio committee on public enterprises on Wednesday that the power utility expected its coal stock fortunes to improve from the end of the year, after a tough year of doing business with Tegeta. The parastatal appeared before Parliament to brief the committee on the company’s results from the end of March.

A key weakness in Eskom's operations, said to have been exploited by companies, was gaps and shortcomings in coal procurement.

However, Eskom has now secured additional contracts to supplement coal stockpiles, Hadebe said.

Tegeta failure

Hadebe told the committee that while the current board inherited a great deal of the procurement challenges from previous leadership, the failure of Tegeta to keep its end of an agreement for 1.3m tonnes of coal a year rocked the company’s coal supply significantly."

In November last year, there was a need to re-state the figures from Tegeta. They came to the company to say they could not supply the 400 000 tonnes as stipulated in the contract. As a result, from December the stockpile decreased," said Hadebe.

Hadebe said the stockpile continued to decrease before new board came into the fold in January. He said after National Treasury put strict conditions in place for the procurement of coal, finding the ideal suppliers proved difficult.

Perfect storm

"In February, National Treasury approved coal procurement under some conditions. Eskom was expected to go back to those who won the contracts, failing which they should open up to the market," Hadebe said.

He said Tegeta’s troubles created the perfect storm for Eskom’s ability to supply stations with coal, saying "a number of incidences" exacerbated the power utility's challenges.

"When Tegeta could not supply 200 000 tonnes, it affected major power stations," he said. When Tegeta went into business rescue, a large amount of coal that Eskom had budgeted for was no longer available, he explained.

New suppliers 

Hadebe added that new suppliers could not meet their targets and the downward spiral continued.

Eskom spokesperson Khulu Phasiwe told Fin24 that the 1.1m tonnes were secured through coal supply companies Eskom set up contracts with.

"Some [companies] have delivered and others will deliver from December or January. The aim is to get the minimum 4m tonnes which is the gap that we have for our power station. After closing the gap we have to build up reserves. We need 15m over the next three years," said Phasiwe.

Phasiwe said Eskom had to supplement three stations that Tegeta had supplied with coal supply from other stations.

"That way you generate enough but that can lead to a shortfall. Three stations were supplied by Tegeta but the shortfall came from sharing coal to other stations. We have arrived at 27 contracts, and now we need to build up coal reserves and that will take, on average, three years," Phasiwe said.

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