Eskom wants compensation if Glencore can't supply coal

Glencore Prodeco mining operation in Columbia (Photo: Supplied)
Glencore Prodeco mining operation in Columbia (Photo: Supplied)

Johannesburg - Eskom said on Wednesday it wants compensation from Glencore's [JSE:GLN] mining subsidiary Optimum if it is unable to supply coal to its Hendrina power plant.

"If they are unable to provide coal to us, they need to compensate us for not meeting their obligations. We have a three-year agreement with them," Eskom spokesperson Khulu Phasiwe told Reuters.

Optimum, which produces 10 million tonnes of coal a year, is under financial strain because it says it was selling coal to Eskom for less than the cost of production.

It has offered to temporarily supply coal to Eskom at the cost of production, higher than what Eskom currently pays, while a new deal is negotiated, the business rescue practitioner said last week.

Eskom said it had a 40 day reserve supply of coal for its 2 000 megawatt Hendrina plant and was looking at other suppliers if Optimum could not resume deliveries within that period.

"We are looking at trucking coal to that power station, that would be our easiest option," Phasiwe said. "Our aim is to get the best price possible because coal prices are so low at the moment."

South Africa's business rescue law allows a financially distressed company to temporarily delay creditors' claims against it or its assets.

Glencore has been desperate to renegotiate the contract it signed in 1993. In terms of the contract, the Optimum mine supplies Hendrina power station with 5.5 tonnes of coal a year.

READ: Eskom’s coal standoff with Glencore unpacked

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