In the dark? You can thank the Guptas for load shedding

2018-12-04 07:17
Eskom has said that its coal supply problems are linked to Tegeta.

Eskom has said that its coal supply problems are linked to Tegeta.

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In the two years that Gupta-owned mines were under the controversial family's control they under-supplied Eskom by nearly four million tons of coal – with zero consequences.

Instead, Gupta-owned Tegeta Resources and Energy exported the four million tons at an average price of R800 to R1 000 a ton, netting a profit of around R3bn, which was quickly stripped out of the mine and out of the country.

Now, amid a coal shortage and years after the fact, Eskom has imposed a R2.6bn penalty for Tegeta's "persistent undersupply", revealing a key failure by the power utility to enforce its coal contracts with the Gupta mines.

Meanwhile, the Guptas and their profits from the coal exports have long since left the country, while millions of South Africans sat at home over the weekend taking turns to be without power for hours on end.

On Monday morning, Eskom announced load shedding would continue this week. It steadfastly maintains this is as a result of unexpected breakdowns and planned maintenance, caused in part by strike action earlier this year.  

READ: Expect more load shedding on Tuesday, tweets Eskom spokesperson

The looming danger now is coal shortages, which could result in more load shedding. According to Eskom, coal shortages pose a very real risk to contributing to more power constraints in the near future. But it is adamant that current load shedding was brought on by strike action as well as breakdowns and scheduled maintenance at other power stations.   

In mid-November 2018, Eskom had stockpiles of less than 20 days at 11 of its 15 coal-fired power stations. Five of these 11 power stations had stockpiles of less than 10 days.

Until earlier this year, Tegeta supplied three of these power stations with coal, including Arnot, Hendrina and Komati.

Hendrina and Komati both relied on Optimum and Koornfontein mines for sustainable coal supply.

They are among those which are severely affected by the coal shortage, which is likely to worsen as the rainy season in Mpumalanga sets in.  

Read: 'Why are you fighting with the Gupta family?' - A tale of Eskom's capture

Gupta-owned mines, all of which were placed under business rescue in February, under-supplied Eskom between April 2016 and March 2018 nearly every month.

More recently, as a result of the penalties levied by Eskom, business rescue practitioners started cutting off supply altogether.

Internal production figures and Eskom supply figures for Hendrina and Komati, among others, show that it was short-changed by the Gupta mines for two years as a coal shortage crisis loomed on the horizon and Eskom officials did not act.

Eskom must now scramble to procure coal on an emergency basis to make up the shortfall, at prices higher than what the utility can afford in the long run.

But cash-strapped Eskom revealed that its debt had grown from R40bn to R400bn during an announcement of its interim financial results this week. Profits have declined since September 2017 from R8.9bn after tax, to just R1bn.

Eskom chairperson Jabu Mabuza admitted that the task of repaying the debt seemed "impossibly high".

The cost of load shedding? Between R20bn and R80bn a month.

A News24 investigation has found that Eskom's current coal crisis was caused largely by Eskom's failure to enforce its contracts with Tegeta. Eskom agreed that Tegeta's under-supply contributed to the current coal shortage.

According to internal production figures for Optimum and Koornfontein and the total tonnages of coal delivered by Tegeta and invoiced and paid for by Eskom between April 2016 and March 2018, Optimum, Koornfontein and Brakfontein mines (all owned by Tegeta) collectively under-supplied 3.8 million tons of coal to Hendrina, Komati and Majuba power stations.

By the numbers - Optimum

News24 established that Optimum supplied 7.3m tons of coal to Hendrina in Pullenshope, Mpumalanga - missing its total supply target for the 24-month period by a little over 2.2m tons.

Based on the coal supply agreement between Eskom and Tegeta, Optimum was meant to supply 9.6m tons.

Tegeta/Optimum only met its monthly target to supply Hendrina three times in 24 months despite Eskom twice relaxing the 458 000-tons-a-month target - once to 375 000 for the months September 2016 to October 2017 and again to 400 000.

Also read: 'Eskom employee' caught driving at 162km/h to 'deal with load shedding'

This week, Eskom said that until August 2016, Optimum Mine was still under business rescue, but that penalties for under-supply still accrued to it. Even with the relaxation, Tegeta did not meet the monthly targets, News24 can confirm.

Over the same two-year period, Tegeta exported 4.09m tons of high-quality coal mined at Optimum, in blatant disregard for its obligation towards Eskom.

"Although Optimum prioritised export sales, Eskom has no contractual right to prevent the mine from exporting coal. Executive intervention and pressure was an option," Eskom said in response to questions about why Eskom officials had not acted to enforce the coal supply agreement.

Koornfontein's supply to Komati power station does not look any better – between April 2016 and March 2018, the Gupta mine only met its target four times.

Koornfontein

It's total target supply was 4.8m tons, of which it supplied only 3.6m tons.

In total, the mine exported 309 532 tons of coal – more than its monthly supply target of 200 000 tons.

Eskom claimed that the shortfall was rectified by mid-2017 "from an alternative source" and that in December 2017, Koornfontein again started under-supplying Eskom.

Once it was placed under business rescue in February this year, Eskom could no longer levy any penalties but penalties for the historical under-supply were calculated into the R2.6bn claim.

Eskom's blind eye

Production figures for Brakfontein were not available, but based on information in the recently published Fundudzi report, commissioned and published by National Treasury and the tonnages supplied by Eskom, it too undersupplied Majuba by 500 000 tons over the two-year period.

Eskom officials hold weekly technical meetings with its coal suppliers, when it determines the amount of coal required for that week and identifies any under-supply.

The supplier must provide Eskom with a rectification plan on how it plans to recover the shortfall of coal within three days, according to the contracts seen by News24.

There is no evidence that Eskom, in the two years, ever took action to enforce its contracts with Tegeta to ensure the coal due to it was delivered.

*Do you have a tip for our investigative journalists? Send an email to tips@24.com

Read more on:    tegeta  |  eskom  |  gupta family  |  load shedding  |  service delivery  |  electricity
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