Johannesburg - Eskom, South Africa’s state-owned power company, could not afford to pay “exorbitant” amounts of money for coal used in its plants, chief executive Brian Molefe said yesterday, responding to criticism of the utility’s purchase of coal from a company owned by business associates of President Jacob Zuma’s family.
Eskom has been buying coal from the Optimum Coal mine, which is being taken over by a company controlled by the Gupta family, since the beginning of the year, after letting a contract with Exxaro Resources to supply about 20 percent of the Arnot power plant’s coal supply expire. Exxaro has said it may need to close its own mine and fire workers.
Read: Eskom sources coal from Guptas
Optimum had been placed in business rescue, a form of bankruptcy, by Glencore after Eskom refused to relax the terms of a contract that Glencore said made the mine unprofitable.
“We are under pressure,” Molefe said. “On the one hand certain mining companies want to keep us paying exorbitant amounts of money for coal and we need to cut our costs. When we ask for increases in electricity pricing, then the same people are also unhappy.”
The Gupta’s Tegeta Exploration and Resources agreed to buy Optimum in December for R2.15 billion. Tegeta and other companies were supplying Eskom’s Arnot power station with coal for about R400 per ton, less than the R900 per ton Exxaro charged, Molefe said.
Tegeta was supplying Arnot at a cheaper rate, saving Eskom and taxpayers money, according to Nazeem Howa, the chief executive of Oakbay Investments, the Gupta family’s investment vehicle, which has a stake in Tegeta.
“Surely we have a right to compete and to tender and we’ll do that on any fair grounds,” Howa said in an interview aired by the SABC yesterday.
While Optimum is now selling some coal to Arnot, the supply contract to take over Exxaro’s share has not been awarded yet, according to Eskom.
BLOOMBERG