State Coal Miner Seen Preventing Eskom’s Fuel Shortage

An increase in coal production by South Africa’s state-owned mining company may help Eskom Holdings SOC Ltd. avoid a repeat of rolling power blackouts, a government official said.

Eskom, which produces 95 percent of the nation’s electricity, cut supply for the first time in six years on March 6 after rains disrupted supplies of coal. Three units went down at its Kendal power plant, which buys coal from BHP Billiton Ltd.’s Khutala mine. Companies earn more by exporting the fuel than supplying it to the state-owned utility.

Eskom would be less prone to substandard supplies if state-run African Exploration & Mining Finance Co. increased output, Mayihlome Tshwete, a spokesman for Public Enterprises Minister Malusi Gigaba, said yesterday by phone. The utility burns coal for more than 80 percent of generation and has asked all producers for better-quality product.

“You’ll have a state mining house that is mining coal and supplying that coal to Eskom,” Tshwete said. “It may assist in a very good way.”

AEMFC sold 1.6 million metric tons of coal in the year ended March 2013, the Central Energy Fund’s annual report shows. The mining company was likely to maintain output from its Vlakfontein colliery at this level until at least 2017, according to data in the Department of Energy’s budget for the 2015 fiscal year. Eskom used 123 million tons of coal in 12 months through March 2013, the utility said in its annual report for that year.

Restricting Exports

The government is separating AEMFC from the Central Energy Fund, with the mining company set to report to the Department of Mineral Resources. The separation will probably be completed this year, the CEF said in the report.

Securing high-grade coal for Eskom would make a compelling reason for the government to introduce restrictions on exports, Tshwete said.

“It’s not like Eskom’s demands for coal are going to completely stop exports,” Tshwete said. “What we’re speaking of is making sure it has at least the bare minimum it needs to have an efficient power system for our economy and our country.”

South Africa exported a record 70.2 million tons of coal from the terminal at Richards Bay, the world’s largest single facility for the fuel, in 2013, 2.8 percent more than a year earlier.

Eskom’s cost to generate electricity using diesel-powered open-cycle gas turbines has risen to 10 billion rand ($929 million) in the year through March compared with a budget of 2 billion rand, Andrew Etzinger, a spokesman for the company, said in an e-mailed response to questions today. The utility uses the turbines to help meet demand during peak evening periods.

“The current-year budget for the open-cycle gas turbines was depleted in the first six months of this financial year,” Eskom said in its report for the first half ended Sept. 30. The company had spent 3.3 billion rand running the turbines by September, compared with 1 billion rand a year earlier, it said.

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