Eskom hits back at Glencore over coal dealings

Cape Town - Eskom has produced letters from Glencore in a bid to set the record straight over suggestions that the power utility lied about how much the mining firm wanted for coal.

"It is unfortunate that Glencore has suggested that Eskom has lied about Optimum Coal Mine [OCM] wanting to increase the coal prices to R570 per tonne," it said in a statement on Sunday.

This followed a News24 report stating that Glencore's last offer made by OCM was R300 per tonne until 2018. “Eskom rejected this offer and terminated negotiations with OCM," said Glencore.

READ: Glencore lashes out at Eskom over coal claims

Eskom CEO Brain Molefe accused Glencore of previously trying to sell coal to Eskom at a rate of R570 per tonne, when he said the price should have been below R200.

The mining company explained that it had engaged in good faith negotiations with Eskom over a period of more than two years. “OCM made a number of proposals to Eskom including increasing the purchase price for the coal for the remainder of the agreement ... after 2018."

Responding to this, the power utility claimed that following failed attempts by Optimum to renegotiate and extend the coal supply agreement for the Hendrina Power Station at prices higher than the R150 per tonne contractual agreement, Optimum later proposed a “compromise deal”.

"In terms of the proposed deal, the coal supply agreement to the Hendrina power station would be renegotiated at R300 per tonne until 2018, and thereafter be extended to 2023 at R570 per tonne," Eskom explained.

The power went on to quote from a letter dated June 30 2015 in which Optimum said: “The base price for the first period and second period shall be escalated on each anniversary of the base date in accordance with a price adjustment factor which is to be calculated in accordance with an escalation table to be agreed between Eskom and Optimum.”

Click here to read the full letter

Eskom made public another letter dated September 17 2015 - when Optimum was under business rescue - in which Optimum proposed a price increase of R630 per tonne and a coal supply agreement extension until 2023.

"In that letter, the business rescue practitioners proposed a coal price increase of R443 per tonne with effect from 1 October 2015 to 31 December 2018. Thereafter the price would increase to R630 per tonne until 2023," the power utility said.

Click here to read the full letter

Molefe suggested that the power utility's woes with the public protector’s report into state capture could stem from his refusal to accept Glencore’s price for coal.

“Having said that, I’ve had time to apply my mind to this matter. I think it’s all because we refused to give Glencore R570,” he said following the release of the damning report which casts doubt on Eskom's board and their association with the Gupta family.

The report also nailed Eskom over a prepayment of almost R1bn to Tegeta for a coal tender to supply Arnot Power Station. This money was allegedly used to buy OCM from Glencore and may be corrupt, illegal and amount to fruitless and wasteful expenditure, the report found.

Madonsela said Glencore appeared to have been severely prejudiced by Eskom's actions in refusing to sign a new agreement with them for the supply of coal to Hendrina Power Station.

Read Fin24's top stories trending on Twitter:

Brent Crude
All Share
Top 40
Financial 15
Industrial 25
Resource 10
All JSE data delayed by at least 15 minutes morningstar logo
Company Snapshot
Voting Booth
Do you think it was a good idea for the government to approach the IMF for a $4.3 billion loan to fight Covid-19?
Please select an option Oops! Something went wrong, please try again later.
Yes. We need the money.
11% - 836 votes
It depends on how the funds are used.
74% - 5553 votes
No. We should have gotten the loan elsewhere.
15% - 1109 votes