Electricity utility Eskom says it and Anglo American have concluded a memorandum of understanding (MoU) that maps out the process to be followed to enable the parties to conclude a final coal-supply contract for the Kusile power station, which is currently being build in the Mpumalanga province.

The MoU focuses on the New Largo colliery, a project owned by Anglo American Inyosi Coal, which is a black economic–empowerment (BEE) company held by Anglo American (73%) and the Inyosi Consortium (27%).

The project will comprise a new opencast mine, as well as a conveyor from the existing Phola processing plant to the 4 800 MW Kusile power station.

Eskom executive for group capital Dan Marokane reported on Tuesday that talks had resumed with Anglo American Inyosi Coal and suggested that both sides were “comfortable” with the process outlined in the MoU.

The focus, he said, was on dealing with the unresolved issues standing in the way of the conclusion of a long-term coal supply agreement.

Work was under way to iron out “technical issues” relating to the mine plan, which would inform the cost of the project and, in turn, the commercial terms of the eventual supply agreement.

The MoU emerged after a high-level intervention between Eskom and Anglo executives in London earlier this year – this after relations broke down, reportedly as a result of Eskom’s 51% BEE ownership stipulations for the project.

Marokane confirmed that the initial 800 MW Kusile Unit 1, which was scheduled for grid synchronisation by the end of 2015 or early 2016, would receive coal from third-party suppliers.

Contracts had already been concluded with those suppliers, with the contracted coal currently being delivered to other power stations within the Eskom fleet, while Kusile project work continued.

Marokane reported that teams were being "remobilised" in line with the MoU and that efforts would be made to “claw back” time that had been lost, while still ensuring that Eskom paid a fair price for the coal.

CEO Tshediso Matona argued that the New Largo issue should be delinked from the so-called “coal cliff” dilemma facing the utility, which related to the need to replenish long-term supply contracts after the existing contracts expired.

He said there was an “urgent need” for Eskom and the coal industry to resolve the matter so as to ensure security of coal supply to the power stations.

“These are big issues that require a systematic engagement with the coal industry,” Matona argued.