Coal
Eskom has long-term coal supply contracts with collieries to ensure a continual supply of coal to its power stations. All coal requirements above those of the long-term contracts are supplied through short- to medium-term contracts, which usually have a road or rail transport element associated with the purchase.

Coal procurement and coal stockpile management have been extremely difficult during the review period, with both coal production and quality issues negatively impacting the supplies to the power stations. Increased international demand for coal, by India and China, creates export opportunities for local suppliers at international market prices. This resulted in increased pressure on both price and quality of contractual and marginal coal requirement. Below specification coal in turn leads to inefficient combustion and increased maintenance requirements.

Coal production and delivery were severely affected during January 2008 as the above factors, combined with wet conditions, led to capacity constraints.

Click here for research into the coal quality effect model.

Recovery plans have been agreed with suppliers to normalise the situation, despite the significant increase in production requirements due to growth in demand.

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. The transport of coal by rail has improved significantly compared to the previous year.

The increase in demand for electricity, combined with the constrained supply of coal, resulted in coal stockpile levels being significantly lower than targeted levels. Added to this, the abnormally high rainfall, and the resulting wet coal, caused coal handling issues both at the collieries and at the power stations. Coal with a high ash content and a high degree of fines¹ turns to sludge when wet, causing blockages on conveyor belts and in the grinding mills, which restricts the flow of coal to the boilers.

¹ Pieces of coal less than 1mm in diameter.

Recovery plan – coal stockpiles

The focus is now on rebuilding coal stockpiles at the power stations to levels of at least 20 days by the winter of 2008. Eskom plans to secure an additional 45 million tons of coal over a twoyear period to supply power stations with additional coal for their normal burn, as well as to rebuild the stockpile. By March 2008, contracts had been concluded for 37 million tons. Eskom and the coal suppliers jointly committed to resolving production and delivery constraints.

Performance – coal purchased and burned

Looking ahead – impact on Eskom’s future coal supply

A detailed study is being conducted to ensure that Eskom’s fuel supply agreements are appropriately positioned to ensure a sustainable coal supply at reasonable prices and of acceptable quality. At the same time, optimised and flexible transport solutions are being investigated.

Eskom is totally dependent on the South African coal mining industry to supply it with coal. The changes in the global market are placing Eskom under increasing risk in terms of securing future supplies from the local market, in which the production capacity has not kept pace with increases in both local and international demand. It is critical that local production be facilitated to ensure longterm security of supply for electricity production. (Refer to the market and industry overview.)

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