Johannesburg - Tegeta Exploration & Resources, a company part-owned by South Africa’s Gupta family, reached an arbitrated settlement over a fine levied on its Optimum coal mine by power utility Eskom Holdings.
The R2 billion penalty was originally issued to the mine’s previous owner, Glencore, which put Optimum into bankruptcy protection in August 2015 after Eskom refused to amend an unprofitable coal-supply contract and fined the producer because the fuel didn’t meet specifications. Tegeta, a company in which both South African President Jacob Zuma’s son, Duduzane, and members of the Gupta family, who are friends with the president, have indirect interests, completed the purchase of the mine last year.
“We are not at liberty to disclose the contents of the agreement but at least we can say that the matter is now resolved,” Khulu Phasiwe, a spokesman for the utility, said by phone. “Details cannot be divulged but the arbitrator has made an award.”
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Glencore spokesman Charles Watenphul declined to comment. Representatives of Gupta-controlled Oakbay Investments, which owns a stake in Tegeta, didn’t immediately reply to an email seeking comment.
“At the time of this transaction, it was an insane coal price contract with an insanely large fine,” Peter Major, director and head of mining at Cadiz Corporate Solutions, said of the Optimum sale. It’s unlikely Tegeta would have bought the asset without expecting that the issues would be resolved, he said.
Peter Grauer, the chairman of Bloomberg LP, is a senior independent non-executive director at Glencore.