Bloomberg last week reported South Africa is pushing coal producers to cut prices to help save Eskom, the debt-ridden state-owned power utility that threatens to unravel the country's finances.
Mineral and Energy Resources Minister said on October 3 in a mining conference in Johannesburg that "at these prices of electricity, this economy is going to collapse", and coal producers need to lower prices to "contribute in ensuring that is actually addressed".
Eskom, which provides about 95% of South Africa's electricity, relies on coal to generate most of its power.
Miners charge Eskom a wide range of prices for coal in contracts varying in length. The cost of the fuel at South Africa's Richards Bay port, from where some producers export, has dropped 32% over the past year, putting additional pressure on the companies.
Coal producers plan more talks with the government over the supply and cost of the fuel, according to the Minerals Council South Africa, the country's mining lobby.
Seriti Resources Holdings Ltd., which is in talks to buy the South African coal assets of South32 Ltd., has taken part in the talks with the government. "It's in all of our interests to get Eskom back on its feet," the company said in a statement, without saying whether it would lower prices.
Eskom's primary energy costs rose 17% in its most recent financial year, due to higher coal charges and increased production from independent power producers. The utility has burned over 100 million tonnes of coal annually for at least a decade.
The utility is seeking to renegotiate unfavorable contracts with the so-called IPPs, said Eskom Chairman and acting CEO Jabu Mabuza. The company is also holding talks with creditors, he said, without saying what Eskom was asking for.
"The funders are being engaged on an ongoing basis and I wouldn't want to preempt that," Mabuza said. "Everybody has to contribute in finding the solutions. I wouldn't want to be picking on anyone but am just saying in the entire value chain."
(Writing by Alex Guo Editing by Harry Huo)
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