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Eskom hits back at Treasury over coal deals

Cape Town – Eskom is "shocked and perplexed" after National Treasury said on Monday that Eskom has failed to honour its undertaking to submit comments to Treasury’s review of Eskom's coal contracts.

"National Treasury started an investigation into Eskom contracts with Tegeta in July 2015," Eskom said in a statement on Monday. "Eskom wants to reiterate that it has been cooperating with National Treasury. Since then ... Eskom has been responding to National Treasury requests.

"It is also true that the National Treasury has requested all contracts related to Tegeta ... and that these contracts were subject to an investigation by National Treasury," it said. "We therefore see no reason to retract the statement to the effect that National Treasury has investigated Tegeta contracts extensively."

Eskom CEO Brian Molefe could be hauled into a meeting with Parliament’s finance committee after Treasury revealed on Monday the power utility had failed to honour its obligation to assist in the review of its coal contracts.

Democratic Alliance MP David Maynier said on Monday that he would request that Molefe meets the standing committee on finance after Treasury said Eskom had chosen to ignore correspondence and put all forms of hindrances to prevent the review from occurring.

"We welcome the fact that … Gordhan has taken the fight to Brian Molefe…, accusing him of failing to cooperate and undermining a review of coal contracts, concluded between Eskom and Tegeta Exploration & Resources, that is being conducted by National Treasury,” Maynier said in a statement.

He accused Molefe of protecting Tegeta’s owners, the Guptas, who revealed this weekend that they are selling their shares in the business.

Maynier revealed last week that Tegeta had threatened Treasury with legal action over releasing its draft report into its coal contracts with Eskom to Maynier.

READ: Release coal docs at your own peril, Guptas warn Treasury

Tegeta's coal contracts under wraps

The DA MP had submitted a Promotion of Access to Information Act request, which legally required Treasury to respond to Maynier. It turned him down, citing Tegeta’s demand.

Treasury said on Monday that it was surprised by media reports of Tegeta “warning” and threatening to interdict the department should it release a report into its investigation of Eskom’s coal contracts.

In legal letters to Treasury seen by Fin24, Tegeta said the coal report was still in a draft format. “Any disclosure thereof will severely prejudice our client …,” Tegeta’s lawyer said on July 13.

Last week, Maynier told Fin24 that he intends appealing the decision. "It's clear the report makes devastating findings against Tegeta Exploration & Resources,” he said in an emailed statement.

“And that's why Tegeta Exploration & Resources are desperate to keep the report out of the public domain,” he said.

Now it appears Eskom is at the heart of delaying the finalisation of that report.

“To date, not only has Eskom failed to honour its undertaking to submit comments to Treasury’s report but it chose to ignore correspondence and put all forms of hindrances,” Treasury said on Monday.

The draft report – which the Sunday Times leaked this weekend – reveals that Eskom paid over R130m to Tegeta for coal it could not use.

“The report … shows that Eskom signed a coal supply deal with Tegeta Exploration and Resources for a commodity they both knew was out of specification,” the Sunday Times explained. “The 10-year contract is worth R400m a year.”

What Treasury wants Molefe to comment on regarding Tegeta

According to the Sunday Times, Treasury wanted Molefe to comment on findings that:

•  Eskom  considered Tegeta’s proposal in 2014 when the company didn’t have a water use licence.

• Eskom negotiated a price for blended coal, which it can’t use.

• A lack of proof that shows Eskom failed to adhere to legislative requirements.

• Eskom allowed Tegeta to supply coal that did not meet contracted standards.

• Eskom paid Tegeta R134m for coal. This finding was made, despite Eskom not providing a list of these payments to Treasury.

• Eskom did not take remedial action after tests by the SA Bureau of Standards proved Tegeta’s coal was out of specification.

• Eskom accepted an inflated price for coal from Tegeta, which pointed to its BEE shareholding as justification.

Reacting to the story, Eskom said on Sunday it disputed that it received out of specification coal worth more than R134m from Tegeta. “We have provided the documentation to that effect to the National Treasury,” it said in a statement.

READ: Eskom denies wasting R134m on 'useless' coal

“In addition, the Department of Water and Sanitation issued Tegeta with a water use licence on 22 December 2014.

“Eskom continues to co-operate with the National Treasury on its investigations of the coal contracts. Contrary to the allegations made by the Sunday Times today, the National Treasury has not issued any conclusive findings against Eskom on any of these contracts,” it said.

All about the Guptas

This weekend, the Guptas announced they would sell all their shares in their South African businesses, including Tegeta.

“We believe that this decision is in the best interests of our business, the country and our colleagues,” the close friends of President Jacob Zuma said in a statement.

However, Maynier dismissed this reasoning on Sunday.

“Things have evidently reached a ‘tipping point’ and the Gupta family has decided that it’s in their best interests to abandon ship in South Africa,” he said.

Maynier said members of the Gupta family and the businesses controlled by them are the subject of multiple investigations, including:  

• an investigation by the Hawks into alleged corruption;

• an investigation by the Financial Intelligence Centre into alleged money laundering;

• an investigation by the South African Reserve Bank relating to the termination of business relationships with certain banks; and

• numerous investigations by National Treasury into alleged corruption relating to their business dealings with state-owned companies including Denel, Eskom and Transnet.

The Guptas replied on Sunday, saying “it is disingenuous for Maynier to suggest that our companies will not participate as required in any investigation”.

Maynier then responded, saying “the truth is the Guptas are not victims”.

Eskom responds to Treasury

Explaining why it was shocked by Treasury on Monday, Eskom said the first request for information from National Treasury to Eskom was received on 31 July 2015.

"A response was sent to them and they came back with their first draft report requesting further information on 15 September 2015. We responded to that request and they came back with a second draft report asking for more information on 21 October 2015. Eskom responded on 11 November 2015 with the required information including all invoices and payments made to Tegeta as an annexure to the response.

"The third request was received on 12 April 2016. Eskom was asked to comment on a 172-page document. This request came with a specific instruction from National Treasury to provide comments after they had been considered by the Eskom Board. The deadline given was 30 April 2016.

"This was an unreasonable request. Consequently, Eskom requested an extension to provide the information, which was granted by National Treasury. We therefore think it is neither unreasonable that our Board will have considered responses to the 172-page document by end of September 2016 nor a reason for National Treasury to label Eskom as uncooperative.

"Furthermore, in a letter from Mr Molefe to Mr Brown dated 24 June 2016 Mr Molefe informed National Treasury of Eskom’s intention to submit the required information after it has been reviewed by the Eskom Board, as per National Treasury instruction of 12 April 2016. 

"Eskom has compiled a response to National Treasury’s report dated 12 April 2016 and the responses are due to be tabled for consideration by the Eskom Board as per National Treasury’s instruction during September 2016. These responses have already been tabled and reviewed by the procurement subcommittee of the Board on 16 August 2016.

"The only letter that Eskom is aware of in which the Minister of Finance refers to prepayments to Tegeta was dated 17 August 2016 (below). Eskom is in the process of compiling a response in this regard in line with our media statements already issued on this topic.

"It is also true that the National Treasury has requested all contracts related to Tegeta (as noted above) and that these contracts were subject to an investigation by National Treasury. We therefore see no reason to retract the statement to the effect that National Treasury has investigated Tegeta contracts extensively."

Gordhan's letter to Eskom:

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