In an apparent stunning turn of events at the press conference held by public enterprises minister Lynne Brown on Friday, the country learnt that Tegeta Resources (owned by the Gupta family and Duduzane Zuma) had received a 78% discount on the fine imposed by Eskom on Optimum coal mine.
Moneyweb previously broke the news in May that the two parties had reached settlement by way of private arbitration, but declined to give details on account of confidentiality. Moneyweb again asked for details of the settlement at the press conference held in the wake of the Eskom Annual General Meeting. Once again, company secretary Suzanne Daniels publicly stated the utility would not be making the details of the settlement public, owing to confidentiality agreements signed by both parties.
But in a move that left egg on the face of Eskom and the minister, deputy editor of the Financial Mail, Sikonathi Mantshantsha, revealed that the settlement figure was in fact R500 million. Eskom did not deny this. When asked why Eskom decided to do a complete about turn, when previously they were adamant the new owner (Tegeta) would be responsible for the full amount, no answer was forthcoming.
Problems with the quality of the coal supplied by Optimum to the Hendrina power station, when Glencore still owned the mine, had led to Eskom imposing the fine of R2.3 billion on Glencore.
The settlement was reached by private arbitration in early March, and was negotiated by Matshela Koko, who was acting chief executive of the utility following Brian Molefe’s departure at the end of December. Mantshantsha said that as far as he knew, the fine had not yet been paid.
This is just further evidence that our initial suspicions about the deal were correct. There was no way any other party on an arm’s length basis, would have found the commercial logic to purchase the Optimum mine in the way that Tegeta did.
In addition to the R2.15 billion penalty Eskom was “adamant” they were pursuing, Tegeta also agreed to honour the supply agreement with Eskom to supply Hendrina with 4.5 million tonnes of coal per annum until the end of 2018, at R150/tonne, which equates to a loss of R300/tonne. Add that all up, and you have operating losses of R4 billion over three years.
There was also the small matter of Tegeta’s share of the purchase price – R2.15 billion of the R2.55 billion. (The other R400 million was contributed by Glencore to settle bank debt.)
Well, following the revelations of the “loan” Eskom provided to cover the purchase price, and the juicy contracts handed to various Tegeta mines, we know now the deal was simply too good to be true. It was corrupt from the beginning.
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