deliver the coal

Little bit old in news but thing that interests me is the mention of Eskom building rail and dedicated haulage roads due to existing road damage. Given that we will be I would say, supplying coal to Matimba and Medupi coal fired power stations, question is will Eskom fund or co fund the tracks to the rail head opposite Grootegeluk? If this is the case how simple will it be getting ore to Richards Bay lol....

Eskom faces competition for coal
Jul 18 2008 7:05AM
Brendan Ryan
Johannesburg - Eskom has managed to rebuild coal stocks at its power stations to an average of 23.8 stock days as of mid-July from 13 days in January when it declared "force majeure" on its major industrial and mining customers.
Announcing this in Johannesburg today, Eskom CEO Jacob Maroga said it was particularly encouraging coal stocks had continued to rise even during the winter months when the power stations traditionally had to run at higher burn rates.

But the 2008 annual report released today shows Eskom is deeply concerned over the the security of its future coal supplies. It also reveals the extent to which the utility ran down its stocks during calendar 2007 leading up to the crisis in January.

The annual report and comments made by Maroga at today's presentation make it abundantly clear why former Kumba Iron Ore CEO Ras Myburgh has been seconded to Eskom to manage the utility's overall coal procurement strategy.

The report shows that Eskom burned 125.3Mt of coal in the year to March but bought only 119.6Mt meaning it ran down its stockpiles by 5.7Mt.

In its 2007 financial year Eskom burned 119.1Mt but bought only 117.4Mt meaning there was a shortfall of 1.7Mt making a total drop in stocks of 7.4Mt over the two year period.

No explanation

By contrast, in 2006 the burn rate was approximately in line with the purchase rate as Eskom burned 112.1Mt but bought in 111.7Mt of coal.

Eskom has never comprehensively explained why it ran its stocks down in this way.

Reasons suggested by observers include; a deliberate policy of reducing stocks, excess burn rates at some power stations caused by maintenance problems which took other stations off-line and problems with Eskom's strategy of sourcing more coal through short-term supply contracts.

Specific suggestion is that Eskom deliberately cut back on purchases from its traditional, long-term suppliers - the major collieries tied into supply contracts with specific power stations - so as to promote black economic empowerment in the coal industry by pushing business towards junior BEE coal companies.

That was denied by Maroga who said the tied collieries had problems supplying the extra volumes of coal that Eskom's power stations needed when run at higher-than-expected burn rates.

Whatever the reason, the statistics show that the amount of coal Eskom bought on short-term contracts rose from 2% of total purchases in financial 2000 to 21% of total purchases in financial 2008.

Much of that coal is delivered to power stations by road - as opposed to conveyor belts from tied collieries - and that has sent Eskom's coal purchase costs soaring.

Eskom's primary energy costs - coal plus diesel for the open cycle gas turbine (OCGT) stations - jumped to R18.1bn in 2008 from R13bn in 2007.

Additional costs to the SA economy include massive damage to the regional road network, particularly in Mpumalanga where most of Eskom's power stations are situated.

The annual report noted that, "the increased dependency on road transport significantly impacted road infrastructure. Eskom is assisting with the repair of roads where necessary in order to facilitate coal transport and road safety."

It is understood Eskom's new strategy is reduce the level of short-term contract coal purchases and shift this to long-term supply contracts.

To achieve this Eskom will have to work in conjunction with other government departments to build dedicated rail lines to certain power stations as well as dedicated haul roads.

The annual report said Eskom was being put out under pressure regarding coal prices and coal availability because of developments in China and India.

"The quality of coal required by importers is declining, particularly in respect of the Indian coal market. This makes many current coal sources and, more importantly, potential future sources, with some beneficiation, attractive to the export market.

Coal shortage

"Such coal was, historically, only suitable for the Eskom market.

"The low growth in South Africa's coal production is of very great concern and poses a serious supply risk to Eskom and South Africa. If there is no intervention, South Africa may face an annual coal shortage of up to 100Mt by 2017.

"The changes in the global market are placing Eskom under increasing risk in terms of securing future supplies from the local market in which production capacity has not kept pace with increases in both local and international demand.

"It is critical that local production be facilitated to ensure long-term security of supply for electricity production."