Minergy, a Botswana-based coal miner short-listed to supply Eskom’s Tutuka power station, said the power utility appears to be dragging its feet in finalising the 100-million tonne supply deal.
Minergy was among 10 suppliers short-listed late in 2020 in response to Eskom’s tender for the supply of 100-million tonnes of coal over 20 years for the 3,600MW power plant.
“We are still in a process of a due diligence ... we’ve seen that there’s no pushing from Eskom to get this thing done,” Minergy CEO Morné du Plessis told Business Day on Monday.
Du Plessis said he was concerned about Eskom CEO Andre de Ruyter’s comments on a potential accelerated decommissioning of SA’s coal-fired power stations and how this might affect coal supply agreements. “I’m not sure how this gels with the tenders that they put out there,” he said.
In return for green funding, Eskom has proposed an accelerated decommissioning of nine power stations, including Tutuka — potentially moving its planned closure forward from 2041 to 2030.
Minergy, a coal mining and trading company which owns the Masama coal mine outside Gaborone, primarily supplies high quality coal to inland industrial users in SA, Botswana and Namibia. Though not critical to the Minergy business case, Eskom supply is seen as a “blue sky” opportunity for the producer as SA’s coal industry faces terminal decline.
In its results for the year ended June 2021, released on Monday, Minergy reported a jump in revenue to 193-million pula (R256m), up from 81-million pula the previous year. The miner also reported a 110% improvement in sales volumes surpassing 415,000 tonnes — from 198,000 tonnes the previous year. However, the company incurred a net loss before taxation of 136-million pula (R180m), compared to a loss of 117-million pula in the year ended June 2020, which was challenged by delayed funding, Covid-19 effects and excessive rain.
The performance, Minergy said, was divided into two distinct periods with different operating environments. “The first eight-month period (July 2020 to February 2021), was negatively affected by delayed funding, Covid-19 impacts and excessive rain; and the last four-month period (March to June 2021), was a more stable production environment moving towards nameplate capacity.”
Looking ahead, the company expects to reach consistent nameplate capacity in the 2022 financial year. Minergy also expects to benefit from continued strong export coal prices which has resulted in high quality product leaving the country, and opening a gap for Minergy to supply SA industrial customers that typically have been supplied by larger local mines.
However, for exporters in SA the opportunity presented by buoyant export prices has been severely frustrated by worsening issues on the Transnet Freight Rail Line.
For Minergy, which has a logistical disadvantage as an exporter through the Richards Bay Coal Terminal, the rail issues and Transnet’s deteriorating delivery more generally, does not have an immediate effect on the business. But it does not bode well for the emerging Botswana coal industry, which pins its hopes on a heavy rail link to SA that could ferry its product to the Richards Bay export terminal.
In August Transnet CEO Portia Derby indicated the utility would no longer pursue expansion of the Waterberg coal link, which would have opened an export route for Botswana coal.
“That’s obviously disappointing,” du Plessis said, but added that discussions have continued at a ministerial level to advocate for the link.
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