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Eskom paid Guptas’ Tegeta in advance for coal supplies

Jun 13 2016 21:00
Kevin Crowley and Paul Burkhardt

Johannesburg - Eskom paid in advance for coal supplied by a Gupta family-controlled company to guarantee supplies to a power plant before winter, said an Eskom executive.

Tegeta Exploration & Resources, controlled by the Gupta family that’s associated with President Jacob Zuma, is supplying Eskom’s Arnot coal-fired facility at an average price of R500 a metric tonne for the fuel, compared with R1 132/tonne Eskom was paying Exxaro Resources in a 40-year agreement it didn’t renew when it ended last year, Eskom said in a statement.

Tegeta is sourcing coal from the Optimum mine it bought from Glencore. Exxaro provided the fuel from the Arnot mine in Mpumalanga province.

“We’ve done this before a couple of times,” Matshela Koko, a generation executive at Eskom, said on Talk Radio 702 on Monday, referring to prepayment. “We wanted to secure the coal supply for June,” which is the middle of South Africa’s winter.

READ: Eskom, Oakbay defend coal contract after prepayment admission

Glencore put Optimum into bankruptcy protection after Eskom refused to amend an unprofitable coal-supply contract and reduce a R2bn fine. It levied the penalty because the quality of coal Optimum provided to the Hendrina plant breached a supply contract.

Tegeta paid the R2.15bn purchase price into an escrow account, a spokesperson for the business rescuers said in April.

If Tegeta fails to supply the contracted coal quality to Hendrina, the same penalty will apply, Eskom said last month.

On Sunday, City Press reported Eskom is allowing Tegeta to divert Optimum coal from the Hendrina power plant, where it pays R174/tonne, to the Arnot facility, which is 50km away and where Eskom pays more for coal. The newspaper cited a mining-industry financier.

Eskom isn’t diverting coal from Hendrina to Arnot, it said in a statement on Sunday.

Eskom is evaluating proposals from companies that bid to be long-term suppliers to Arnot, and will announce its decision by September, it said in an e-mailed response to questions. Tegeta didn’t respond to the request for proposals to supply.

Under the current contract, Tegeta will supply 1.25 million tonnes of coal from April to September. The utility has approval to expand a contract with Umsimbithi Mining, another interim provider of the fuel, to supply 540 000 tonnes from June to September, which will “sufficiently address the winter shortfall and security of supply risk", it said.

ALSO READ: 5 ‘truths’ the CEO of Gupta-owned Oakbay wants you to know

oakbay investments  |  eskom  |  guptas  |  coal  |  sa economy


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