Mystery fine discount revealed

Indian businessmen Ajay and Atul Gupta
File picture: Muntu Vilakazi/Gallo Images

Eskom suddenly mellowed after Guptas bought coal mine

After driving Optimum Coal into business rescue last year, thereby endangering almost 2 000 jobs at the mine, Eskom suddenly reached a settlement that gave the Gupta family a 75% discount on the R2.1-billion fine it had levied on the company at the time it was owned by global commodities trader Glencore.

According to Business Day newspaper, in March this year Eskom agreed to accept a R500-million settlement for the non-performance penalties it had levied on Glencore.

The agreement was reached after Eskom issued Glencore a summons demanding the payment of the fine for what it said was the miner’s failure to deliver suitable coal for the Hendrina power station.

At the time, in September 2015, then Eskom CEO Brian Molefe vowed Eskom would not enter into discussions with Glencore or Optimum. “We want our money and we will recover all of it,” Molefe said.

Glencore made numerous attempts to renegotiate the penalty, and to renegotiate its R150 per ton, 40-year coal supply agreement with Eskom, which it said was below the cost of production.

This hard stance caused Glencore to place the company in business rescue, threatening jobs. The business rescue practitioners put the company up for sale, and the Gupta family, through its Oakbay Resources & Energy, started negotiations to buy.

Eskom’s hard stance continued throughout the sale process. The Guptas took over the company last year, after which Eskom was willing to negotiate on the R2.1-billion penalty.

Eskom was keen to recover its R2.1-billion fine from Glencoreowned Optimum, but its executive responsible for coal procurement, Matshela Koko, is said to have lied about Eskom assisting the Gupta’s Tegeta Resources with R695-million in pre-payment for another of its companies that supplied Eskom.

This money was used by Tegeta to fund its acquisition of Optimum, former public protector Thuli Madonsela said in her investigation report into state capture last year.

When the private arbitration concluded this year, Koko was Eskom’s acting CEO. Eskom declined to divulge the quantum of the agreement, citing a confidentiality clause, but sources leaked the information to Business Day.

At a media briefing yesterday, Eskom used the same confidentiality clause to avoid explaining the basis on which it had agreed to the 75% discount.

Pressed to intervene in the interests of transparency, Public Enterprises Minister Lynne Brown instructed Eskom to divulge the information, after clearing the confidentiality clause with the counterparty.

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