Optimum coal got kid glove treatment under Tegeta, commission hears

Coal supply unit manager at Eskom, Gert Opperman, told the Zondo Commission of Inquiry into state capture on Friday that coal supply agreements between the power utility and Optimum coal mine were treated with extreme leniency after Tegeta acquired it from Glencore.

The commission's evidence leader, adv. Vincent Maleka SC, quizzed Opperman about why Eskom sought outside consultation on a dispute related to Eskom and Optimum coal mine's coal supply agreement instead of him.

From Opperman's testimony it is understood that Eskom primary division Petrus Mazibuko's recommendation was that Eskom halt imposing a penalty of R585m on Tegeta's Optimum because it would cripple the business.

Opperman told the committee that Eskom had systems by which it could protect itself financially from coal supply challenges, namely dispute mechanisms with the supply if coal was of poor quality and penalties for under supply.

However, Opperman told the commission he knew of disputes over penalties issued to Optimum mine, under Glencore’s ownership by Eskom amounting to R2.1bn.

Opperman was testifying at the commission on Friday, after Snehal Nagar, Eskom’s head of finance for its primary energy division, testified on Wednesday that he received an email from superiors with a proforma invoice for R659m to be paid to Tegeta Exploration and Resources in 2016.

Nagar said on Tuesday that he and his team went along with it as the instruction came from the top of the company. He said it was by Maya Naidoo, an official in the office of Eskom’s then-CFO Anoj Singh, ordering him to make the payment within two to three hours.

"Some contracts have provision for under-supply. They are very harsh. The moment the supplier under-supplies a request for plans on fund recovery will be requested and considered. We would liaise with the company to figure out what to do next," Opperman told the commission.

Opperman said Optimum was of the view that the coal supply agreement had to be re-negotiated. Opperman told the commission that after Glencore took over the Optimum mine, Eskom started to experience coal quality supplied to Hendrina power station from the mine.

"Deductions that are made consider the sizing penalty from the period when Tegeta came to the table and they wanted to renegotiate the sizing specification. When we were dealing with the dispute it was related to the quality and with the sizing specification being considered up to 2013," Opperman said.

Asked why there were long disputes on penalties of Optimum mine while there was an existing set-off method to address this, Opperman says there was a difference in interpretation of its penalty provisions, resulting in disputes over the calculations of penalties.

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