Eskom Signs Coal Supply Agreement With Employee-Owned Arnot Mine

  • Eskom has entered into an agreement with Arnot OpCo (Pty) Ltd for the supply of coal for the Arnot Power Station.
  • In terms of the agreement, Arnot OpCo will supply the full coal requirement for the life of Arnot Power Station.
  • The coal is of high quality, and if the need arises, it may be used at other stations.
  • The contract has an exit clause after Year 6 that may allow both parties to cancel the contract.

The agreement serves to secure coal supply and to meet the burn requirements of the power station by conveyor belt, replacing the current supply by road from various sources on short- to medium-term contracts, some of which were signed under emergency and urgent procurement. This transaction paves way for Eskom to reduce the costs of operating the Arnot Power Station while securing high quality coal at affordable prices.

Related information: Arnot power station is one of many ageing coal fired power stations in Eskom’s fleet. Construction of Arnot power station started in 1968 and was fully operational by 1975. It has six coal fired generation units with a total of 2352 MW installed capacity. The plant averages around 1.1million tons of No2 emissions a month.

“While securing affordable coal supply for the Arnot Power Station, this transaction will help create employment opportunities for the retrenched Arnot Mine workers and entrepreneurship opportunities for the Middleburg community,” said Sandile Siyaya, Eskom’s General Manager for Primary Energy. “The transaction demonstrates that a mining asset curtailed by a major miner can be operated viably in the hands of a junior miner.”

Arnot OpCo is half-owned by 1 038 former Exxaro Resources employees who were retrenched in 2015 from the Arnot Mine in Middelburg, Mpumalanga. JSE-listed Wescoal Holdings owns the other half of Arnot OpCo.

These employees lost their jobs at the expiry of the previous coal supply agreement in 2015, which resulted in Exxaro decommissioning the mine. Since 2016, the former employees embarked on a process to acquire, reopen and to operate the mine.

In 2019 Eskom issued a request for proposals to the open market in order to secure coal supply to cover the remaining operating life for the Arnot power station. Arnot OpCo submitted a proposal with a view to reopen Arnot Colliery. The broad-based worker-led consortium effectively took over Arnot Colliery in February 2020 upon winning the Eskom tender to re-open and operate the mine.

Author: Bryan Groenendaal

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