Anglo American’s sale of its South African coal mines will probably run into next year as bidders struggle with attempts by Eskom to transform its relationship with coal suppliers.
Pembani Group‚ Sibanye Gold and Royal Bafokeng Holdings are on a shortlist of bidders for the operations that supply Eskom with more than a quarter of its coal‚ two sources said.
The suggestion by a senior Eskom executive last week that Anglo should cede its mining rights to the state‚ and uncertainty over what sort of new off-take agreements the utility will give the new owners‚ will draw out the sale process‚ they said. They asked not to be identified because the process is private.
“Uncertainty over who Eskom can buy coal from‚ how much Black Economic Empowerment ownership you have to have‚ all this uncertainty could make this a drawn-out process‚” said Ben Davis‚ a mining analyst at Liberum Capital in London. “There are huge hurdles.”
After losing 75% of its value to become the worst performer on the FTSE 100 Index last year‚ Anglo is selling more than half its mines around the world to save itself. The company‚ formed in SA almost a century ago to benefit from Johannesburg’s gold-mining boom‚ is disposing of its coal and iron-ore businesses‚ both of which have operations in the country.
Anglo’s coal business produces 50 million tons of the thermal type in SA‚ with 17 million tons being exported.
The London-based company will have to work with Eskom on the sale‚ because the utility owns part of the assets‚ Group Generation executive Matshela Koko wrote in Business Report on April 21. The company did not respond to requests for comment on Tuesday.
“Eskom technically owns part of‚ if not the majority of‚ operating assets and the mining infrastructure‚ while Anglo owns the mining rights and some of the surface rights‚” and the companies will “need to engage in order to effect radical transformation through the potential new owners”, Koko wrote. He suggested Anglo cede its mining rights to a state-owned mining company.
The sale process could last “as long as Eskom wants to take”, said Xavier Prevost‚ an analyst at XMP Consulting.
“Behind this is Eskom’s policy of economic empowerment‚” he said. “All these delays would increment the possibilities of facing a market scarcity of coal for power generation.”
Eskom is the biggest South African buyer of coal‚ using it to generate 83% of the electricity it produces for the continent’s most-industrialised economy. The utility has been forced to improve savings and reduce the amount it spends on coal after the energy regulator capped an electricity-price increase for the year that started April 1 to an average 9.4%.
Fitch Ratings had assumed Eskom would be allowed an increase of about 12%.
Eskom “will now more vigorously shape and transform the industry”‚ Koko said.
“This is important and Eskom is mandated to ensure optimal usage of national assets‚ especially where it has financed and developed the requisite infrastructure for this industry.”
This will have an impact on the coal sector’s structure “as the status quo cannot be justified and is not sustainable”.
Anglo chief executive Mark Cutifani told investors last week the company had appointed advisers‚ prepared due-diligence information and engaged with potential buyers for assets including thermal coal in SA.
“We are progressing discussions‚ including the issues you raised about ownership‚ with key stakeholders like Eskom and government as well as potential interested parties in order to exit from our Eskom-tied mines‚” Anglo spokesman Moeketsi Mofokeng said.
“Information regarding the various engagements and bidders cannot be disclosed at this stage as Anglo American is bound by confidentiality undertakings with potential bidders.”
Sibanye is “assessing opportunities” that could include coal assets‚ though the process with Anglo seems to be at an early stage‚ spokesman James Wellsted said by phone.
“It does seem as if it’s not just going to involve Anglo Coal‚ it looks like it’s going to involve Eskom as well and we don’t know what their requirements are right now.”
Pembani and Royal Bafokeng declined to comment. — BDLive-Bloomberg
Anglo mines sale set for delays
Pembani Group‚ Sibanye Gold and Royal Bafokeng Holdings are on a shortlist of bidders for the operations that supply Eskom with more than a quarter of its coal‚ two sources said.
The suggestion by a senior Eskom executive last week that Anglo should cede its mining rights to the state‚ and uncertainty over what sort of new off-take agreements the utility will give the new owners‚ will draw out the sale process‚ they said. They asked not to be identified because the process is private.
“Uncertainty over who Eskom can buy coal from‚ how much Black Economic Empowerment ownership you have to have‚ all this uncertainty could make this a drawn-out process‚” said Ben Davis‚ a mining analyst at Liberum Capital in London. “There are huge hurdles.”
After losing 75% of its value to become the worst performer on the FTSE 100 Index last year‚ Anglo is selling more than half its mines around the world to save itself. The company‚ formed in SA almost a century ago to benefit from Johannesburg’s gold-mining boom‚ is disposing of its coal and iron-ore businesses‚ both of which have operations in the country.
Anglo’s coal business produces 50 million tons of the thermal type in SA‚ with 17 million tons being exported.
The London-based company will have to work with Eskom on the sale‚ because the utility owns part of the assets‚ Group Generation executive Matshela Koko wrote in Business Report on April 21. The company did not respond to requests for comment on Tuesday.
“Eskom technically owns part of‚ if not the majority of‚ operating assets and the mining infrastructure‚ while Anglo owns the mining rights and some of the surface rights‚” and the companies will “need to engage in order to effect radical transformation through the potential new owners”, Koko wrote. He suggested Anglo cede its mining rights to a state-owned mining company.
The sale process could last “as long as Eskom wants to take”, said Xavier Prevost‚ an analyst at XMP Consulting.
“Behind this is Eskom’s policy of economic empowerment‚” he said. “All these delays would increment the possibilities of facing a market scarcity of coal for power generation.”
Eskom is the biggest South African buyer of coal‚ using it to generate 83% of the electricity it produces for the continent’s most-industrialised economy. The utility has been forced to improve savings and reduce the amount it spends on coal after the energy regulator capped an electricity-price increase for the year that started April 1 to an average 9.4%.
Fitch Ratings had assumed Eskom would be allowed an increase of about 12%.
Eskom “will now more vigorously shape and transform the industry”‚ Koko said.
“This is important and Eskom is mandated to ensure optimal usage of national assets‚ especially where it has financed and developed the requisite infrastructure for this industry.”
This will have an impact on the coal sector’s structure “as the status quo cannot be justified and is not sustainable”.
Anglo chief executive Mark Cutifani told investors last week the company had appointed advisers‚ prepared due-diligence information and engaged with potential buyers for assets including thermal coal in SA.
“We are progressing discussions‚ including the issues you raised about ownership‚ with key stakeholders like Eskom and government as well as potential interested parties in order to exit from our Eskom-tied mines‚” Anglo spokesman Moeketsi Mofokeng said.
“Information regarding the various engagements and bidders cannot be disclosed at this stage as Anglo American is bound by confidentiality undertakings with potential bidders.”
Sibanye is “assessing opportunities” that could include coal assets‚ though the process with Anglo seems to be at an early stage‚ spokesman James Wellsted said by phone.
“It does seem as if it’s not just going to involve Anglo Coal‚ it looks like it’s going to involve Eskom as well and we don’t know what their requirements are right now.”
Pembani and Royal Bafokeng declined to comment. — BDLive-Bloomberg
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