South Africa's Exxaro says Eskom woes to hit coal production
JOHANNESBURG, June 26 (Reuters) - South African miner Exxaro
Resources expects its coal production to fall by 5% by
volume in the first half of 2019, mainly due to reduced demand
from struggling state-owned power utility Eskom, it said on
It added it expects domestic coal demand and pricing to
remain stable for the remainder of the year, but does not see a
recovery from the international price/ demand situation.
Slowing economic growth in China is weighing on demand
expectations for thermal coal in the world's biggest market for
the fuel, while global moves towards cleaner energy are
compounding problems arising from a glut in supply.
The supply-demand tandem is likely to keep prices for coal
used in power plants under pressure in coming months.
Exxaro Finance Director Riaan Koppeschaar said in a
statement a contractual agreement with Eskom would help mitigate
the reduced volumes at home.
"China will continue to influence the supply/demand balance
in the Pacific with related potential price volatility," he
Coal capital expenditure (capex) in 2019 is expected to be
9% lower than guided in March, primarily because of delays with
the Grootegeluk 6 plant expansion project.
Delays in finalising approvals for Thabametsi coal-fired
power plant and lenders withdrawing their funding to old coal
technology coal-fired power stations also contributed to the
lower capex spend forecast.
Exxaro is also feeling the impact of Group Five's
cash-flow problems which resulted in the struggling construction
firm being placed under "business rescue", similar to U.S.
Chapter 11 bankruptcy protection in March.
During the first quarter, Exxaro was forced to terminate its
contract with now de-listed Group Five, who was responsible for
parts of the Grootegeluk 6 expansion.
Responding to South Africa's long-delayed carbon tax, which
became law in May, Exxaro said it would have a low impact on its
organisation as its relevant emissions were not significant.
(Reporting by Nqobile Dludla
Editing by Alexandra Hudson)
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