Portfolio Committee on Public Enterprises
Eskom has established a work group with Transnet to investigate how additional rail infrastructure can be put in place to address coal supply to its power stations. Eskom provided an update on coal supply to the portfolio committee on public enterprises in Parliament.
Mr Brian Dames, Eskom’s chief operating officer, outlined its long-term coal supply strategy to meet future coal demand.
A key aspect of the strategy is to build up a portfolio of long, medium and short-term coal contracts. The contracts would work with prices based on efficient costs and fair returns for the mining industry.
Eskom also wants to put adequate coal transport infrastructure in place. Much of the current thinking revolves around moving from road to rail and considering the viability of conveyors.
According to Mr Dames, a work group had been established with fellow parastatal Transnet to look at how rail infrastructure could be developed. Currently, an extension of the Mpumalanga rail network was being considered. Coal transportation costs had been rising as distances between power stations and coal mines increased.
Eskom was also prepared to invest in coal beneficiation to improve the quality of coal. Eskom had declared during its presentation that coal quality had become a problem. Poor quality of coal impacts adversely on the operational efficiency of power stations.
Progress had been made in terms of stock management. The supply risks of each power station had been analysed and taken note of. Currently, each station had an average stock supply of 36 days. The target was to achieve an average of 42 days. Risks at each station were monitored on a daily basis.
Various factors were taken into consideration when determining a station’s risk profile. Such factors included above average rainfall, coal quality, road and rail infrastructure and the amount of coal available in the area.
Stock levels had been at their lowest in early 2008 when power outages were experienced.
Eskom would also look at improving partnerships with major stakeholders. Mr Dames added that “high level engagements” with the various mining houses were underway. Importantly, a national energy coal forum had been established with government, the mining companies, trade unions and Transnet to address major stumbling blocks.
In terms of long-term investments, Eskom would also focus on upgrading the water supply infrastructure.
Eskom confirmed that coal remained a critical part of South Africa’s energy mix. Presently, Eskom consumed more than 50% of the country’s total coal production. The vast majority of coal supplied came from three companies, namely, Anglo Coal, BHP and Exxaro.
Mr Dames called for increased investment in the mining industry to meet future demand. Total coal demand in South Africa is projected to increase by 20% over the next ten years. Skills capacity within the mining industry also had to be addressed to improve productivity.
Tied collieries, in particular, needed further investment to extend their life cycles. Such collieries had long-term contracts in place with specific stations. They had struggled to increase supply when higher levels of coal stocks were required. Supply was facilitated by means of conveyor belts.
Overall, Eskom was keen to reduce its reliance on short-term coal contracts. The parastatal also wanted to pay a fair price for its coal.
Sabinet Cape Town Office
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