Eskom Inks Duvha Coal Supply Agreement

Eskom said on Monday it has given final consent to South32 SA Holdings’ request for the sale of its majority shareholding in South32SA Energy Coal Holdings (Pty) Ltd (SAEC)  to a company owned by Seriti Resources Holdings.

The coal supply agreement (CSA) between SAEC and Eskom required South32 to obtain Eskom’s consent for any change in the ownership of SAEC, which supplies most of the 2,875MW power station’s coal requirements.

As part of the transaction, and due to the strategic importance of securing the coal supply for Duvha, the parties agreed on a modification of the CSA until December 31 2024. The modification of the CSA also secures the continued use of SAEC’s infrastructure at the mine so alternative coal supplies can be delivered over conveyor into the power station.

In June 2019, SAEC had invoked the hardship clause in the CSA, citing significant financial losses as a consequence of selling coal to Eskom below its cost of mining. Eskom’s hardship review and due diligence confirmed the mine was loss-making, with increased risk of failure.

The CSA modification was approved by the National Treasury on May 1 2021.

The modification gives Eskom sufficient time to seek alternative coal supplies, if required, and to resolve coal delivery infrastructure constraints at the power station.

The CSA modification will also prevent massive job losses at the mine, while securing coal supply for Eskom at an affordable price, said the utility.

“Of critical importance to Eskom is to secure the continued delivery of coal for the Duvha power station, and this agreement provides that security of supply at a price that is affordable to Eskom,” said André de Ruyter, group CEO of Eskom.

“Prior to this transaction being concluded, Eskom conducted an independent due diligence exercise on Seriti led by a firm of attorneys. Eskom is satisfied the new owners of SAEC have the capacity to fully discharge their obligations to Eskom in terms of the CSA,” he said.

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