In an apparent bid to reverse the negative impact of the ill-advised decisions of the previous board of directors, Eskom has reversed its earlier cost-plus mines policy, which was implemented under the reign controversial former Chief Executive Officer, Brian Molefe.
The company’s interim CEO, Phakamani Hadebe, revealed this on Thursday during a press conference at the company’s head office yesterday.
Prompted by the growing concerns about falling coal reserves at some of its power stations, Eskom has said it is resuming investment in mines that are strategically located near its power stations.
In 2015, when justifying the decision to abandon the cost-plus mine model, Molefe famously remarked, “If it is bread you need, why buy the entire bakery.”
On Thursday, speaking at a meeting, in an indirect response to Molefe, Eskom had convened to provide an update on the coal stock situation, Hadebe said, ‘Buying coal is not buying bread.”
The cost-plus mine arrangement guarantees power stations with a steady supply of coal due to their proximity with the mine where the coal is sourced from. The respective power stations are deliberately designed to use the type of coal produced at the mine.
According to terms of the arrangement, Eskom enters into a long-term agreement with mine owners. Eskom bears the capital risk for the development and expansion of the mine, with the assurance of supply at a rate of a cost, topped up by a small margin. The power utility also oversees the operations to ensure prudency of cost.