(Alliance News) - Eskom Holdings SOC Ltd said Monday it has given its final consent to South32 Ltd's request for the sale of its majority shareholding in South32 SA Energy Coal Holdings Pty Ltd to coal miner Seriti Resources Holdings Pty Ltd.
In November, diversified metals and mining firm South32 had agreed to sell its 92% holding in coal subsidiary for an upfront payment of ZAR100 million. The consideration also included a deferred payment which will see South32 receive a portion of the cash flow generated by the unit, capped at ZAR1.5 billion.
However, in April, South32 amended the original agreement by adjusting the up-front cash payment to a nominal consideration and removing the deferred consideration. The terms related to the 49% of earnings from operations were not changed.
The coal supply agreement between South32 and Eskom required that the state-owned utility gave its consent for any change in the ownership of South32 SA Energy Coal, which supply most of the coal requirements for the Duvha power station in Mpumalanga, South Africa.
As part of the transaction, both parties have agreed on a modification of the supply agreement until the end of 2024, which secures the continued use of South32's infrastructure at the mine so that alternative coal supplies can be delivered over conveyor into the power station.
For Eskom, the modified agreement gives the firm time to find other sources of coal if required.
"Of critical importance to Eskom is to secure the continued delivery of coal for the Duvha power station, and this agreement provides that security of supply at a price that is affordable to Eskom. Prior to this transaction being concluded, Eskom conducted an independent due diligence exercise on Seriti, led by a firm of attorneys. Eskom is satisfied the new owners of SAEC have the capacity to fully discharge their obligations to Eskom, in terms of the CSA," said Chief Executive Andre de Ruyter.
South32's shares were up 2.1% at AUD2.99 in Sydney on Monday.
By Dayo Laniyan; dayolaniyan@alliancenews.com
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South32 (S32)