Stockpile: Coal stores at the Grootvlei power station, operated by Eskom in Grootvlei, Mpumalanga. The big four companies provide between 70% and 80% of Eskom’s annual coal consumption. Picture: BLOOMBERG
Stockpile: Coal stores at the Grootvlei power station, operated by Eskom in Grootvlei, Mpumalanga. The big four companies provide between 70% and 80% of Eskom’s annual coal consumption. Picture: BLOOMBERG

Eight of Eskom’s 15 coal-fired power stations had less than the minimum required 20 days of coal stockpiles and two of these stations have less than 10 days of coal, the utility says.

These levels though dire, in fact show an improvement on November when 11 stations had stocks falling short of the 20-day benchmark. Just last week four stations had coal for less than 10 days.

Overall stockpiles are slowly rising with reserves up to 28 days and on track to exceed 32 days by the end of the financial year. The utility said it had also locked in 2.7Mt tons of 4Mt in emergency coal and placed 35 new coal contracts this year. Thursday also marked the fifth consecutive day that power cuts, or loadshedding, was not implemented.

“It’s progress, but we are certainly not out of the woods yet”, Eskom GM of operations Dan Mashigo said at a media briefing.

Eskom’s situation, both financially and operationally, is indeed dire. Its debt cost have ballooned but electricity sales continue to decline. In November it began implementing load shedding, which is a last resort to prevent a nationwide blackout. Recent power cuts have not been directly caused by coal shortages but rather by plant breakdowns resulting from inadequate maintenance.

Still, the question of coal supply weighs heavily on Eskom.

Mashigo said a number of factors conspired to cause its coal supply crunch.

Critically, a decision under former management to suspend investment in cost-plus mines has directly caused these five mines to now fall short. “We are not getting contractual values from cost-plus mines because we did not capitalise mines at the right times,” Mashigo said.

The "cost-plus" strategy was to invest capital in coal mines, in order to lock in long-term supply agreements at good prices  (cost plus a modest margin). 

Mashigo said the utility was also in competition with the export market when trying to secure coal. About 80Mt was moved out of SA in 2017, he said.

Mashigo said Eskom would prioritise investing in its cost-plus mines, even within its severe capital constraints, and would seek to extend these and other long-term fixed price contracts where appropriate. 

Assisted by Transnet, a railway solution would also help it bring more coal from Limpopo to its Mpumalanga power stations.

steynl@businesslive.co.za