Eskom’s row with Glencore gets nastier

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  2. companies

Johannesburg – The public spat between Eskom and global commodity trading and Glencore got uglier yesterday with Eskom coming out all guns blazing to defend its coal supply price for its Hendrina Power Station.

Glencore had lashed out at Eskom a day after the release of Public Protector Thuli Madonsela’s “State of Capture” report said it appeared to have been severely prejudiced by Eskom’s actions in refusing to sign a new agreement with them for supplying coal to Hendrina.

Picture: Dean Hutton. Credit: BLOOMBERG

Glencore rejected Eskom claims that its Optimum Coal Mine sold coal at high prices and said it had negotiated in good faith for over two years with with Eskom. It went on to accuse Eskom of lying about Optimum wanting to raise coal prices and denied it had proposed a coal price of more than R300 a ton for Hendrina.

Yesterday Eskom challenged Glencore’s accusations in a statement in which it gave a blow-by-blow account of its negotiations with Optimum.

Eskom said Optimum had failed to renegotiate and extend the supply agreement for the Hendrina at prices higher than the R150 per ton contractual agreement, and it later proposed a “compromise deal”.

In the proposed deal, the coal supply agreement to Hendrina would be renegotiated at R300 a ton until 2018, and thereafter be extended to 2023 at R570 per ton, Eskom said.

In a letter dated 30 June 2015, 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.” In another letter dated September 17, 2015, when Optimum was under business rescue, they proposed a price increase of R630 per ton and a coal supply agreement extension until 2023.

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

Eskom said it was not involved in the sale agreement between Glencore and Tegeta.

“All Eskom was interested in was to ensure that the new owners were aware that the coal prices, volumes and quality would not be renegotiated or compromised, and that the penalties imposed on Optimum would not be waived,” it said.

Optimum was slapped by Eskom with a R2 billion fine for poor quality coal and filed for business rescue. It was acquired by Gupta-owned Tegeta Exploration and Resources out of business rescue for R2bn and awarded the contract to supply emergency coal to Hendrina to avert load shedding.

Eskom board member Pat Naidoo said, the company had saved R3bn by awarding Tegeta with the Hendrina deal.

Molefe defended the Tegeta contract and said he did not think President Jacob Zuma should resign because the company refused to give Glencore the costly R570 a ton contract.

Glencore said in its letter it had made a number of proposals including increasing the purchase price for the coal for the remainder of the agreement in exchange for, among other things, a withdrawal of Optimum’s hardship claim under the agreement and an extension of the agreement after 2018.

“At no stage, did Optimum raise the topic of load shedding… The last offer made by Optimum, while it was under Glencore’s control, was R300 per ton until 2018 not R530 per ton. Eskom rejected this offer and terminated negotiations with Optimum,” the company said.


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