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Cape Town - A controversial prepayment loan for coal to Tegeta Exploration and Resources - a Gupta family-controlled company - has been 'repaid in full', Eskom confirmed on Wednesday.
"We can confirm that the full amount of the prepayment to Tegeta has been recovered via coal delivered to Eskom by the end August 2016. During this period of time Eskom had sufficient security in place to cover any potential default by Tegeta," the power utility said in a statement.
The Gupta family, who have strong links with President Jacob Zuma as well as his son Duduzane and Gupta business associate Salim Essa, own the majority of Tegeta.
Eskom concluded a contract with Tegeta to supply 1 250 000 tonnes of coal from April to September 2016 and obtained approval to extend the contract with Umsimbithi to supply 540 000 tonnes from June to September 2016.
"These two contracts in our view sufficiently addressed the winter shortfall and security of supply risk relating to coal procurement."
Eskom said an internal audit review was conducted and concluded that the process followed for the procurement and prepayment complied with the Public Finance Management Act and National Treasury regulations.
The power utility said it was approached by the Directorate of Priority Crime Investigation (DPCI), adding that it will cooperate with them should they approach Eskom.
Eskom explained that the contract with Tegeta was concluded on the basis of an off-take agreement between Optimum Coal Mine and Tegeta.
"Hence the prepayment was paid to the contracting party being Tegeta. Optimum in turn supplied the coal to Tegeta and received payment from Tegeta. Eskom did not have a contractual obligation to pay Optimum Coal Mine as asserted by the business rescue practitioners."
Eskom reiterated that prepayment is a common commercial practice that is used widely, and not unique to Eskom contracts. It noted that it is used in large projects, coal mining contracts and emergency supply contracts.
The power utility explained that it obtained independent intelligence of a potential protest action at Rietkuil and surrounding areas in December 2015, which increased the security of supply risk, prompting a declaration of an emergency. It said continued monitoring of the security of supply risk from January to March revealed that it needed to build up its coal stock requirements. Umsimbithi experienced strike action around this same time, which placed a further strain on stock levels, prompting an immediate need for additional coal, said Eskom.
Eskom approached Umsimbithi and Tegeta in April 2016 to increase supply to mitigate the shortfall.
"Both suppliers were able to meet Eskom’s requirements for additional coal quantities at the required coal quality which resulted in approval for the extension of both contracts by the Board tender committee on 11 April 2016."
Eskom said Tegeta indicated that the required coal quality can only be sourced if they divert their export quality coal to supply Eskom. In addition, there was an indication that additional equipment was needed to reach the required tempo of coal delivery to Eskom that would mitigate the shortfall.
"Tegeta mentioned these as the factors that led the company to request a prepayment from Eskom. Umsimbithi indicated that they were able to supply additional coal with no additional resource requirements.
The Tegeta prepayment request, said Eskom, was considered on its merits, which were the security of supply risk circumstance and previous transactions of a similar nature.
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