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Eskom concerns could hold up Glencore-Xstrata merger

Keywords: Tags  Eskom, Glencore, Xstrata, coal, Metal Bulletin, Bianca Markram


JOHANNESBURG — The planned merger of Glencore International Plc and Xstrata Plc may be delayed after South Africa’s power utility, Eskom Holdings Ltd., raised concerns with the South African competition regulator that the merger could impact Eskom’s coal supplies.

Eskom said that it does not intend to block the merger, but it has asked the competition authority to consider imposing certain conditions because a merged Glencore-Xstrata could constrain its ability to acquire competitively priced coal when it needs it.

The Sandton, South Africa-based utility had complained previously to the government that coal producers were exporting too much coal and charging domestic consumers too much.

Zug, Switzerland-based Xstrata, one of South Africa’s biggest coal producers, supplies large quantities of thermal coal to Eskom’s coal-fired power stations. Baar, Switzerland-based Glencore, which also owns coal mines in South Africa, increased its output fivefold to 20.6 million tonnes from 2011 to 2012, but also stepped up exports.

Eskom estimated that the merged entity would account for some 15 percent of Eskom’s total coal supply, according to a Reuters report.

South Africa’s competition authority approved the merger in October, but Eskom applied for a right to intervene. The regulator will hold hearings through Dec. 14.

The $31-billion merger has already received unconditional approval in seven countries. China’s competition regulator is still deciding, but it is expected that China will attach certain conditions to its approval of the deal. 

A version of this article was first published by AMM sister publication Metal Bulletin.


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