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Concern about lack of disclosure of Eskom, Tegeta arbitration details

Apr 16 2017 17:28
Carin Smith

Cape Town - Eskom is seeking permission from Tegeta Resources, owner of the Optimum coal mine, to make details of its recent independent arbitration settlement public, according to a statement by the Department of Public Enterprises.

The arbitration stems from a coal quality dispute dating from when Optimum was still owned by Glencore and under contract to supply Eskom's Hendrina power station.

Glencore claimed the price it was paid by Eskom was less than the operating costs of the mine. Eskom, on the other hand, was not happy with the quality of coal supplied and indicated it will enforce a penalty of R2.2bn in terms of its agreement with Glencore.

Optimum went into business rescue and was bought by Gupta-linked Tegeta for R2.15bn. Bloomberg reported in March last year that a firm that’s almost half-owned by President Jacob Zuma’s son, Duduzane, obtained shares in Tegeta Exploration & Resources weeks before it bought Optimum, share register documents show.

READ: Zuma’s son took stake in Tegeta 3 wks before Optimum buy

Eskom has not made public the value of the arbitration award and indicated that it can only be made public if both parties - Eskom and Tegeta - consent.

The Department of Public Enterprises issued a statement last week in which Director General Mogokare Seleke said he has requested a briefing from Eskom on the arbitration award in the Optimum Mine matter to satisfy himself that Eskom’s interests are secure.

This is because, as director general, he exercises an oversight role as shareholders’ representative, on behalf of government.

"The arbitration award settles a longstanding dispute between Eskom and Optimum Mine over coal prices and supply, according to the statement.

"In terms of the rules of arbitration the quantum of the award may be publicly revealed on agreement of both parties. Eskom’s legal representatives have approached those representing Tegeta Resources, owner of Optimum Mine, to obtain the necessary consent."


The dispute between Eskom and Glencore is mentioned in the State of Capture Report by former public protector Thuli Madonsela. Eskom also made a prepayment of about R600m to Tegeta for coal still to be delivered. At the time concerns were raised that the prepayment was actually to enable Tegeta to buy Optimum.

Energy analyst Chris Yelland told Fin24 on Sunday that there are widespread perceptions of an improper relationship between Eskom and Tegeta.

"This kind of secrecy plays into these perceptions. It is important, in my view, that Eskom should dispel these perceptions by not keeping the settlement details undisclosed, as it fuels perceptions of something improper," explained Yelland.

"The best way to stop these perceptions is to come clean. It is surprising that Eskom would even agree to keep the settlement agreement undisclosed in the first place."

READ: Glencore lashes out at Eskom over coal claims

Yelland added that he is not making any allegations of an improper relationship, but pointed to the concerns raised in Madonsela's report. These allegations are, however, being challenged.

"Yes, it is speculation and one can read into it what one wants, but up to now Eskom has not revealed the settlement details. This gives the impression that Tegeta is not willing to reveal the details," said Yelland.

"The penalty amount of R2.2bn Eskom was adamant about enforcing in the Glencore days is a very significant amount of money. We don't know what amount has been settled upon, but if it has been reduced, Eskom will come under a lot of pressure."

Yelland said this would be especially in the light of Eskom having been adamant in the past that it will not relent on the R2.2bn penalty payment. In his view, the relationship between Eskom and Tegeta will then be seen as improper.

"It is not unusual in arbitration for the final settlement to remain undisclosed. Here, however, one of the parties is a state owned enterprise and money is effectively owed to the state and the public of SA," said Yelland.

"The state must act on behalf of the people of SA. There is a lot of feeling that this lack of disclosure is irregular."

Read Fin24's top stories trending on Twitter:

glencore  |  tegeta  |  eskom  |  gupta  |  sa economy


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