Eskom's proposed tariff hike can be detrimental to the middle class citizens which can lead to job losses, cable theft adn debt increases. Picture: Dean Hutton/Bloomberg
Eskom's proposed tariff hike can be detrimental to the middle class citizens which can lead to job losses, cable theft adn debt increases. Picture: Dean Hutton/Bloomberg

Eskom stands firm on Optimum fine

By Banele Ginindza Time of article published Aug 12, 2015

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Johannesburg - Eskom is not willing to waive R2 billion worth of penalties against Glencore’s Optimum mine and would not renegotiate the cost plus supplier agreement dating back to 1983.

This according to acting Eskom chief executive Brian Molefe said who yesterday emphasised that summonses had already been issued for the mine to settle the amount.

Molefe said Optimum had at some stage reneged on the agreement by exporting good quality coal and not shared the benefits with Eskom as a partner under the cost plus arrangement, which dates back to 1983 and was renewed for 30 years in 1993.

Quality deterioration

“But because we are now tied to that mine, when the quality of the coal deteriorated we cannot shift, we are inflexible. And the deterioration in the quality of the coal has been contributing to the performance of our generating equipment, in fact it has been damaging our generating equipment,” Molefe said at the annual financial results presentation at Eskom’s headquarters Megawatt Park.

But Optimum was adamant in a statement yesterday that it did not owe Eskom for anything and that the parastatal had burned the very coal it had claimed was of inferior quality and had damaged power generation equipment.

Glencore’s spokesperson Gugulethu Maqetuka said: “Optimum is disputing the Eskom penalty claim, which would have the effect of Optimum supplying coal to Eskom for an effective price of R1 per ton.

“The coal supplied by Optimum to Eskom is amongst the highest quality coal supplied to Eskom and is the quality of coal that the mine is capable of producing on a sustainable basis.”

She said Eskom had burnt the coal and it resulted in no meaningful issues for Eskom.

Optimum was now in business rescue as a result of the severe financial hardship, which it has been suffering as a result of the Eskom contract, she said.

She said the business rescue practitioners would determine the appropriate course of action for Optimum and were attempting to engage with Eskom.

“Glencore is willing to extend certain post commencement funding to Optimum to afford the business rescue practitioners an opportunity to assess the company and time to prepare a business rescue plan for Optimum,” Maqetuka said.

Molefe said there were things with Optimum that had happened over the years and they would be explained by history one day. “The contract with Optimum still has two years to go. They are under contractual obligation to supply us with coal until 2018 at a particular price. They asked to be relieved of their obligation and we are not in a position to relieve anybody of their obligation,” Molefe said.

He maintained that Optimum had accrued penalties of R2bn, “which they owe us and we have issued summonses. The R2bn must be paid because they owe it to the taxpayer, to Eskom.”

He said Optimum had asked for a waiver of the penalties.

But “unfortunately Eskom’s financial position and standing does not allow us to waive any penalties, or to renegotiate contracts simply for the sake of rescuing a particular mine in Hendrina, simply because we are not in the business of rescue of mines… that is for business rescue specialist”, he said.

“We will just pursue our obligation that we have in terms of South African law as well as all the debts that are owed to us,” Molefe said.

Glencore shares yesterday fell by 3.62 percent to R38.36.


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