South Africa: Eskom Talks to Get Coal for Kusile Plant Drag On for 13 Years

South Africa’s state-owned utility has yet to agree a supply contract for the bulk of coal needed for its newest power station, more than a decade after approving a plan to negotiate with Anglo American Plc.

In 2007, an Eskom Holding SOC Ltd. committee signed off on the start of talks with Anglo for as much as 17 million tons of coal a year from the New Largo mine, located near the Kusile power station northeast of Johannesburg. But construction delays at the plant and protracted talks with the mine’s new owner mean a final agreement may still be 18 months away, Eskom said in a report to the South African parliament’s Standing Committee on Public Accounts.

Seriti Resources Holdings Ltd. “requested additional time to review the New Largo mine plan and business case before they can engage,” Eskom said. “The delay will have an impact ultimately on the mine construction and first coal.” The prospect of finishing the 4,800-megawatt Kusile plant without having enough coal to generate electricity threatens to exacerbate Eskom’s already battered reputation. The company has missed a series of deadlines to add generation capacity and racked up a debt burden to more than 450 billion rand ($26 billion), while regular power outages have held back an economy that slipped into a recession last quarter.

“We recognize that the development of the main mine is lagging the development of the adjacent Kusile power station and so expediting these contractual discussions is both important and urgent,” Seriti Chief Executive Officer Mike Teke said in an emailed response to questions. “We intend to start negotiations with Eskom as soon as possible for the supply of coal from the main mine.”

In the meantime, Eskom and Seriti have been negotiating the mining of mini-pit areas of New Largo, which could result in two million tons of annual production by the end of the year. The utility is also talking to third-party suppliers. “There will be no delay of coal supply to Kusile Power Station,” Eskom said.

Anglo began to exit assets including coal mines that supply the South African utility in 2016. Seriti expanded quickly by acquiring projects including New Largo, an estimated 585 million-ton coal resource the could supply as much as 12 million tons of fuel a year, according to Teke. A feasibility study is almost complete and will inform the size of investment needed for construction, he said.