Eskom prepaid Guptas R586m for coal

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Eskom’s group executive for generation Matshela Koko admitted on Sunday that Eskom had agreed to prepay half a billion rand to a coal mining company owned by the Gupta family and President Jacob Zuma’s son, Duduzane.

This was revealed during an interview with television programme Carte Blanche, and followed City Press’ front page report, outlining how Eskom came to the Guptas’ rescue with this particular coal contract.

When Carte Blanche journalist Devi Sankaree Govender initially asked Koko if Eskom had prepaid R586 million to the majority Gupta-owned Tegeta Exploration and Resources, Koko denied it.

However, after being presented with a document that Koko himself signed, he backtracked, saying: “Let’s say I made a mistake.”

The prepayment deal is particularly controversial because it appears to have been signed just days before Tegeta unexpectedly came up with R2.15 billion in funding to buy Optimum mine.

For the past two days, both Eskom and Tegeta’s Nazeem Howa have been on the offensive, refuting both the City Press and Carte Blanche reports before they were published and broadcast, respectively.

Eskom justifies the prepayment on the basis that Eskom needed to urgently secure coal for Arnot power station to avoid load-shedding, and that it was not an unusual move.

Eskom has also hit back at City Press’ report, claiming that the newspaper “offers no evidence to support its wild allegations”.

However, most of the figures and details used in the City Press report were contained in official responses from Eskom, including confirmation of the total contract value of R546 million.

However, it has now emerged that this contract was valued at R586 million – excluding the transport costs of the coal to the Arnot power station.

In particular, Eskom has argued that Tegeta has in fact saved Eskom “billions” when compared with the high cost of coal that Eskom was paying to source coal under the 40-year-old cost-plus contract with Exxaro, which Eskom claims was costing it R1132 per ton.

At R581 per ton Eskom pays to Tegeta, the state utility says it is getting a good deal.

City Press also reported that public enterprises minister Lynne Brown told Parliament in May last year that Eskom pays an average price of R230.90/ton for coal, and that the average price of Eskom’s five most expensive contracts was R428.84/ton.

City Press requested the most up-to-date figures from Eskom but these were not been forthcoming. In an interview with News24, Howa said this was “comparing apples with pears”.

Eskom said on Sunday that City Press did not publish the tonnages provided by other suppliers because this “would stand in the way of their scoop”.

However, City Press asked Eskom to provide the tonnages supplied and the prices paid, and Eskom declined to disclose how much other suppliers were being paid but disclosed that while Tegeta supplied 255 024 of coal in April, Hlagisa supplied 157 477 tons, Exxaro supplied 122 857 tons and Umsimbithi supplied 49 336 tons.

Umsimbithi would not confirm the price paid but confirmed it was less than the price Tegeta received.

Both Eskom and Howa have also raised objections to the City Press claim that coal that was destined for Hendrina power station, where it fetches R174 per ton, was diverted to Arnot power station 50km away from which Tegeta receives R580 per ton.

Various industry analysts and miners to whom City Press spoke questioned why Eskom did not take possession of the full 458,000 tons of coal that Tegeta is contractually bound to provide to Hendrina at a very low price, but instead allowed Tegeta to use those tons to supplement their delivery to Arnot.

This allegation was explicitly put to both Eskom and Tegeta. Tegeta declined to comment on any of the allegations in the story, while Eskom responded saying that as far as they were aware “no coal meant for Hendrina is being diverted to Arnot”.

According to Eskom, Tegeta has only delivered 315,000 tons of a coal a month for the past three months to Hendrina, despite Hendrina’s burn rate being set at 425 000 tons per month.

Based on these figures, City Press also asked Eskom whether Tegeta had for the past three months been failing to meet their deliveries. Eskom declined to comment, saying only: “The commitment from Optimum, going forward is to meet the Hendrina burn requirements.”

Following the report, Eskom and Tegeta have both claimed that the coal supplied to Arnot is of a higher quality, justifying the higher price.

In addition to the detailed questions sent to Tegeta, City Press requested an interview with the company to discuss Tegeta’s turnaround of Optimum Coal as well as Tegeta’s strategy for Optimum going forward. Tegeta declined.

Eskom has also objected to the suggestion that Exxaro had been “blind-sided” when Eskom decided not to renew their Arnot contract and said that City Press had suggested that the contract had been cancelled.

This was informed by discussions City Press had with various sources familiar with the Arnot contract during the course of last year. City Press reported that Eskom decided not to renew the contract.

According to share registers City Press obtained from the Gupta group of companies, Tegeta Exploration and Resources is owned 29% by Oakbay Investments (made up of various members of the Gupta family), 28.5% by Mabengela Investments (in which Duduzane Zuma owns a 45% stake) and 21.5% by Elgasolve (believed to be 100% owned by businessman Salim Essa although Essa has repeatedly denied City Press access to the share registers of this company).

Two UAE-based companies whose ownership remains opaque, own stakes of 13% (Fidelity Enterprises) and 8% (Accurate Investments).

We live in a world where facts and fiction get blurred
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