January 18, 2013 / 3:37 PM / 5 years ago

South Africa's Eskom drops objections to Glencore-Xstrata

JOHANNESBURG (Reuters) - South African power utility Eskom has withdrawn its objections to commodities trader Glencore’s (GLEN.L) takeover of miner Xstrata XTA.L, removing one of the potential hurdles to the $33 billion deal.

Earlier on Friday, Glencore pushed back the date for completion of the long-awaited tie-up to March 15, citing lengthy regulatory processes in South Africa and China.

Eskom, which was concerned the deal could affect its coal supplies, said it dropped the objections after agreeing a framework for discussion with Glencore on the issue.

The utility relies on coal-fired plants to generate 85 percent of the electricity that powers Africa’s biggest economy and has been keen to ensure the merger does not hamper its ability to obtain timely, sufficient and competitively priced coal.

Xstrata is one of South Africa’s biggest coal producers and a key supplier of the fuel to Eskom. The merged company will be supplying 15 percent of Eskom’s coal and will also be among the largest traders in the coal market, the utility has said.

Eskom initially asked South Africa’s competition regulator to impose conditions on the Glencore-Xstrata tie-up to ensure its coal supplies were not at risk.

“In consequence of the agreement reached between the parties, Eskom has agreed to withdraw its intervention in the merger proceedings,” the utility said on Friday.

    Eskom wants to ensure that the merged company does not dominate the market by setting prices that it cannot afford or opt for exports hoping for higher returns.

    Insufficient and poor qualities of coal have been a concern to Eskom in the past and affected its ability to meet fast- rising demand for electricity.

    Glencore is still waiting for the go-ahead for the deal from antitrust authorities in South Africa and China, having already received a conditional approval from European regulators.

    Regulatory hearings in South Africa were scheduled to last until January 28. The National Union of Metal Workers of South Africa (NUMSA) will present its arguments, while the Competition Commission has made recommendations regarding job losses.

    Reporting by Agnieszka Flak; Editing by David Dolan and Erica Billingham

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