Eskom wasn’t interested in helping Optimum – Marsden

The commission of inquiry into state capture today heard testimony from former business rescue practitioner of Optimum coal mine (OCM) and Optimum Coal Holdings (OCH), Piers Marsden, a qualified chartered accountant.

The commission will now hear testimony from former business rescue practitioner of Optimum coal mine, Mr. Piers Marsden#StateCaptureInquiry

— State Capture Commission (@StateCaptureCom) March 13, 2019

Following the July 31, 2015, decision by the board of directors of OCM to place the company under voluntary business rescue, Marsden was appointed business rescue practitioner alongside Petrus van den Steen, an appointment effective immediately after August 4, 2015.

Marsden told the commission that soon after his appointment he found that OCM’s sole customer had been Eskom and that a long-term agreement was in place between the two entities.

Furthermore, Marsden said he found that the mining company was losing cash on a monthly basis and at the time relied on its shareholder to survive.

Marsden says when they took over at Optimum Coal Mine (OCM), there was a long term agreement with Eskom. He says they were selling coal at R150 per tonne and the company was facing financial difficulties at the time. #StateCaptureInquiry

— State Capture Commission (@StateCaptureCom) March 13, 2019

Marsden told the commission that the R2.17 billion penalty levied by Eskom on OCM for failing to meet coal quality specifications set out in the coal supply agreement had a significant impact on the mine’ finances.

Marsden says OCM was faced with R2.1 billion from Eskom. He says the penalty has a significant effect in two respects. #StateCaptureInquiry

— State Capture Commission (@StateCaptureCom) March 13, 2019

The penalty would have forced the mine to sell coal which was already being supplied at R150 per ton to be sold at R1 per ton, Marsden said.

Marsden was then forced to sell coal at R1 per tonne and that would add to the increasing financial loss of the company.#StateCaptureInquiry

— State Capture Commission (@StateCaptureCom) March 13, 2019

It became apparent to Marsden that a solution to OCM’s situation would require the cooperation and assistance of Eskom, so he attempted to engage the entity, he said.

Marsden says what became apparent when they arrived at OCM was that any solution would require Eskom's cooperation, to manage the mine in the interim and secure a long term rehabilitation solution. At the time OCM was only supplying coal to Eskom. #StateCaptureInquiry

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— State Capture Commission (@StateCaptureCom) March 13, 2019

Marsden told the commission he tabled a number of solutions to the power utility but Eskom was “steadfast and unmoving” regarding the long term contract, which ended in 2018 and expected the mine to deliver on the contract from 2015 until it came to an end.

A meeting was convened between the business rescue practitioners and Eskom’s management, however, the meeting failed to yield positive results as relations between the mine and the power utility were strained at the time, Marsden said.

Marsden says few days into OCM they arranged a meeting with Eskom management. He says the meeting did not yield positive results. He says the relationship between OCM and Eskom was already strained. #StateCaptureInquiry

— State Capture Commission (@StateCaptureCom) March 13, 2019

On August 20, 2015, the mine switched off its conveyor belts supplying coal to Eskom, while the power utility continued to insist that OCM should comply with the agreement in place.

Marsden says business rescue practitioners took a decision to suspend coal supply to Eskom. He says they hoped this would push Eskom to help OCM. #StateCaptureInquiry

— State Capture Commission (@StateCaptureCom) March 13, 2019

Evidence leader at the commission, Advocate Vincent Maleka estimated that the period that OCM ceased supplying coal to Eskom may have been 13 days.

Former Eskom CEO Brian Molefe called Marsden to set up a meeting with the business practitioners, the chief executive of OCM’s holding company, Glencore, Clinton Ephron and the power utility’s executives, Marsden said.

Marsden says Mr Ephron and Eskom executive had a meeting, they came up with interim agreement. It was agreed that coal supply must resume, coal will be sold at R150 per tonne and payment of invoices will be done with seven days. #StateCaptureInquiry

— State Capture Commission (@StateCaptureCom) March 13, 2019

The meeting was held at Eskom’s Megawatt Park, however, Marsden remained outside of the meeting venue and only learned about what had been discussed from Ephron after the meeting had been concluded.

Ephron told the business practitioners that an interim agreement had been reached which included that the mine resupply Eskom with coal, he said.

Marsden said while negotiations with Eskom continued, OCM received an unsolicited bid on September 10, 2015, to purchase the mine which was made by Gupta-owned Oakbay.

Marsden says around Sept 2015 they received purchase offer from Tegeta. He says they did not consider it cause they were more focused on the negotiations with Eskom.#StateCaptureInquiry

— State Capture Commission (@StateCaptureCom) March 13, 2019

However, the business practitioners and OCM were focused “very much on the Eskom renegotiation”.

Marsden said three options were presented to the power utility, which included selling the mine to Eskom or a third party, but the entity was not willing to negotiate.

We are back. Marsden says at one point they presented three options to Eskom, he says Eskom was not willing to negotiate. #StateCaptureInquiry

— State Capture Commission (@StateCaptureCom) March 13, 2019

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