Coal news and updates

Give Eskom better coal or face regulation, miners told

THE Department of Public Enterprises has said the mining sector has two options when it comes to Eskom’s low-grade coal problem — the mines either had to better guard the quality of coal supplied to the state power utility or face regulation, Public Enterprises Minister Malusi Gigaba’s spokesman Mayihlome Tshwete said on Tuesday.

Thursday’s load shedding added impetus to the government’s argument that coal should be declared a strategic resource, Mr Tshwete said.

But there is industry opposition to coal being declared a strategic mineral, a step that would enable the government to dictate selling prices, and which the industry argues would further damage the South African coal sector’s investment prospects.

Eskom’s resorting to load shedding for the first time in at least six years of tight power supply is one of several factors curbing South Africa’s economic growth. The 2008 load shedding cost the economy billions of rand.

Mr Tshwete said Mr Gigaba met with the Chamber of Mines and the Department of Energy on Monday night, with the "most obvious" issue emanating from the meeting being the poor coal quality with which Eskom had to contend. This added heft to the government’s argument that coal should be declared a strategic resource.

The mining sector had two options, because it was untenable that Eskom, the "custodian" of South Africa’s electricity supply, could not properly control its inputs — either the mines had to better guard coal quality to Eskom, or face regulation. The ministry was keen on the least painful option, Mr Tshwete said.

A poor batch of wet coal supplied on Thursday morning resulted in three of Kendal power station’s units shutting down, reducing energy supply by about 3,000MW, precipitating power cuts.

Eskom CEO Brian Dames said he had asked BHP Billiton, which supplies Kendal, for a report on the quality of coal that was supplied on Thursday.

Mr Tshwete said two conveyor belts at Kendal broke down because of the poor-quality coal. "It’s very fine and when it gets wet it is cement-like. Two conveyor belts at Kendal got stuck because of the muck."

Mr Dames met the South African Chamber of Commerce and Industry (Sacci) yesterday amid business concerns over the lack of certainty on whether load shedding would be part of the country’s near future.

Eskom has not ruled this out. Mr Dames said South Africa was paying the price for poor government decisions: "In 1998 you made a decision that Eskom would not build (generating capacity). It will take 10 years to fix the 1998 problem."

Eskom’s pleas in the late 1990s for more capital investment in power generation went unheeded by a government bent on opening the market to private operators at a time when there was a power surplus in South Africa.

Sacci CE Neren Rau said Sacci was disappointed Mr Gigaba had not attended the meeting. Mr Tshwete said Mr Gigaba and Mr Dames had agreed that the minister, who is head of elections for the African National Congress, would continue with other events.

"It would have been better if the minister had been there. Brian’s role is at an end, so there were things he could not say. It was a bit of a setback, but we will pursue him for a meeting," Mr Rau said. He said certainty was key for business, but the chamber realised that this was "a tall ask".

"We want as much clarity as possible. Since Thursday we have gone day-to-day not knowing what the level of risk (of not having available electricity) is."

Eskom was expensively running open-cycle gas turbines to augment South Africa’s taut electricity supply and any energy savings from consumers would help to alleviate the risk of further load shedding, Mr Dames said.

However, just as bad weather had compromised feedstock supply in Mpumalanga, where more than two weeks of rain had soaked coal stockpiles, Eskom’s attempts to refill diesel tanks were being hampered by "bad weather in the Cape, (where) you can’t get ships in (to harbours)", he said.

Source: BDlive