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Why Eskom crushed R2.1bn Optimum fine to just R255.4m

Jul 19 2017 13:21

Cape Town - Eskom reduced a massive R2.1bn fine levied on partly Gupta-owned Tegeta because of a problem with the coal crusher, explained Eskom chief financial officer Anoj Singh.

He came clean on the matter at Eskom's financial results presentation in Johannesburg on Wednesday.

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The struggling Optimum mine was bought by Tegeta Exploration & Resources, a company owned by the Gupta family and President Jacob Zuma's son Duduzane, after it went into business rescue.

Tegeta inherited the fine when it bought the mine from Glencore, before it was concluded in arbitration.

READ: Concern about lack of disclosure of Eskom, Tegeta arbitration details

Eskom struck a deal with Tegeta on the fine in March during arbitration. However, the power utility refused to disclose the details of the agreement, citing a confidentiality agreement.

"Eskom went into this process with legal opinion saying it should settle this claim," said Singh.

He said the underlying nature that gave rise to the claim was that Eskom was disputing coal quality from the mine.

The poor quality was because of a change in sampling equipment in 2010, said Singh.

"The change meant it was different than the original sampling equipment. The new design had a crusher, which increased the reject coal put in the plant. It gave a false positive of quantity of reject coal. This was the outcome of investigations over three to four years," he explained.

"We realised the contract was punitive and poor quality coal was being delivered. That is why the amount ramped up so quickly. When we realised the crusher was the problem, we understood that we had sufficient information that the crusher was causing this. That is why we went into settlement. The contract manager said the claim should be R700m. This was then discounted to R255.4m."

Eskom board chairperson Zethembe Khoza ealier announced that former acting Eskom CEO Matshela Koko will face disciplinary action, relating to tenders awarded to Impulse International while his stepdaughter was a director at the firm.

“The board has taken a decision to pursue disciplinary action against Mr Koko," he said, adding that the minister of public enterprises is aware of the decision.

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