Eskom ‘paid Tegeta in advance for coal supply’

Eskom paid in advance for coal supplied by Tegeta Exploration & Resources to guarantee supplies to a power plant before winter, according to an executive.

Johannesburg - South Africa’s electricity utility paid in advance for coal supplied by a Gupta family-controlled company to guarantee supplies to a power plant before winter, an Eskom executive said.

Tegeta Exploration & Resources, controlled by the Gupta family that’s associated with President Jacob Zuma, is supplying the utility’s Arnot coal-fired facility at an average price of R500 ($33) a metric ton for the fuel, compared with R1 132 a ton Eskom was paying Exxaro Resources in a 40-year agreement it didn’t renew when it ended last year, the electricity producer said in a statement.

Tegeta is sourcing coal from the Optimum mine it bought from Glencore. Exxaro provided the fuel from the Arnot mine in Mpumalanga.

“We’ve done this before a couple of times,” Matshela Koko, a generation executive at Eskom, said on Johannesburg-based Talk Radio 702 on Monday, referring to pre-payment. “We wanted to secure the coal supply for June,” which is the middle of South Africa’s winter.

Glencore put Optimum into bankruptcy protection after Eskom refused to amend an unprofitable coal-supply contract and reduce a R2 billion fine. It levied the penalty because the quality of coal Optimum provided to the Hendrina plant breached a supply contract. Tegeta paid the R2.15 billion purchase price into an escrow account, a spokeswoman for the business rescuers said in April.

If Tegeta fails to supply the contracted coal quality to Hendrina, the same penalty will apply, Eskom said last month.

BLOOMBERG