Eskom said on Friday that it will announce the winning bid to supply coal to its Arnot power station before the end of this quarter, after raising concerns over Exxaro’s performance and rising cost of coal.
Exxaro’s Arnot Mine has been supplying coal to the power station as part of the long-term coal contracts that Eskom entered into with coal miner’s decades ago.
Eskom has, however, recently expressed displeasure with the coal contracts, citing lack of performance and rising costs of the coal.
Exxaro’s contract with Eskom to supply coal to the Arnot power station in Mpumalanga expired on 31 December 2015.
"In anticipation of this contract coming to an end, Eskom then issued a Request For Proposals (RFPs) in August last year, inviting all interested bidders, including Exxaro, to put forward their proposals for the supply of coal to the Arnot power station," said Eskom spokesperson Khulu Phasiwe.
The closing date for the RFPs was at the end of October. Eskom is currently evaluating the RFPs, "a process which is expected to be finalised soon".
The winning bidder or bidders will be announced before the end of this quarter,” Phasiwe said.
He said the Arnot power station was currently operating as usual, despite the lapse of the coal contract.
This was because the Arnot mine was not the biggest supplier of coal to the power station.
Exxaro confirmed that Eskom had given it a notice to terminate the contract
He said that for the past 10 years the power station has been receiving over 80% of its coal supplies from other suppliers. "We have been getting more coal from the other players," Phasiwe said.
The Arnot mine needs approximately four million tonnes of coal a year. Phasiwe said it was too early to tell if Eskom would get the required coal from a single supplier or multiple suppliers. "We will get an indication from the RFP process," he said.
Exxaro and Eskom have been in negotiations about the coal supply contract since 2013.
In a statement, dated 30 November 2015, Exxaro confirmed that Eskom had given it a notice to terminate the contract.
Exxaro further said it was a mining right holder "and Eskom owns the Arnot Mine movable and immovable assets and therefore Eskom will ultimately be liable to defray all costs related and incidental to the closure of the Arnot Mine".