By Alex MacDonald and Devon Maylie
South African state-owned electricity provider Eskom Holdings
Ltd. has withdrawn its official complaint with South Africa's
competition authorities regarding Glencore International PLC's
(GLEN.LN) proposal to merge with Xstrata PLC (XTA.LN) in a deal
that would create the world's fourth largest diversified mining
company.
The complaint was withdrawn after reaching a mutual agreement
with Glencore that provides a framework for the two to cooperate
with each other and which governs "the interaction between them
regarding existing and future coal supply agreements," the two
companies said in a statement Friday.
The news came shortly after the South African Competition
Tribunal began hearings on outstanding complaints from Eskom and
The National Union of Metal Workers Friday. The hearings are
scheduled to end Jan 28.
"Eskom expects that the spirit of the memorandum of
understanding (MOU) will ensure that its concerns relating to the
potential impact of the merger will be addressed," the companies
said.
Eskom previously said it was concerned about its ability to
obtain sufficient and competitively priced coal, but it noted that
it didn't want to block the merger. Meanwhile, The National Union
of Metal Workers said it would seek limits on layoffs.
Eskom produces about 90% of the country's electricity through
coal-fired power plants and had already complained to the state
that coal producers are exporting too much and charging too high a
price.
In the past few years, Glencore has been adding to its coal
production in South Africa, acquiring a majority ownership of the
country's sixth-largest producer this year. South Africa is the
world's seventh-largest coal producer. Glencore previously said it
saw demand from Eskom as a driver for its investment.
Eskom said it would no longer attend the hearings. The hearings
are expected to continue, however, since the metals workers' union
hasn't withdrawn its complaint, said Alex Olvera, an analyst at
brokerage firm Marex Spectron's Event Driven Team. Mr. Olvera
gleaned the information from a lawyer the team had hired to attend
the hearings on its behalf.
Write to Alex MacDonald and Devon Maylie at
alex.macdonald@dowjones.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires