Eskom, Numsa granted right to intervene in Xstrata merger hearings

ESKOM and the National Union of Metalworkers of South Africa (Numsa) have been granted the right to intervene in the Competition Tribunal’s hearings next week on the merger of the world’s largest commodity trader, Glencore, and mining group Xstrata.

Eskom has proposed that the tribunal impose conditions on the merger that could include measures such as ensuring the ratio of exports to domestic coal supply be kept constant after the merger, and that the merging parties agree to negotiate in good faith on long-term coal-supply contracts as these expire.

The utility says it does not want to stand in the way of the merger, but has to raise its concern about the future supply of coal for the domestic market.

Public hearings on the merger start on Monday.

The company says it has a public mandate to supply electricity to the entire country and is dependent on the right grade of coal at the appropriate time and at an affordable price to be able to deliver on its mandate.

In the absence of industrial policy that provides for the security of domestic supply before exports, the merger highlights Eskom’s vulnerability.

Eskom spokeswoman Hilary Joffe says: “The merged entity would account for approximately 15% of Eskom’s coal supply, with Glencore and Xstrata accounting for the bulk of the supply to the Majuba and Hendrina power stations and supplying smaller quantities to Duvha, Komati, Arnot and Matla power stations.”

Although it has secured the majority of its supply needs until 2018, Ms Joffe says Eskom needs to raise its concern about supply security beyond that.

Eskom indicated that it would propose additional conditions if necessary.

Xstrata is the world’s largest exporter of the type of coal used by power stations, and all of its mines and plants are in South Africa.

Glencore holds almost 34% of Xstrata and after this transaction — valued at $80bn — is approved, the miner will become a wholly owned subsidiary of Glencore.

It currently produces 27.4-million tons of saleable coal a year in South Africa, of which almost 30% is exported.

Source: Business Day