On Friday last week, Tegeta Exploration and Resources threatened to shut down the conveyor belts that supply coal to Hendrina power station.
Tegeta – owned by the Guptas, Trillian founder Salim Essa, and the president’s son Duduzane Zuma – wanted Eskom to increase the R150/ton it pays to Tegeta for coal from the Optimum mine.
Susan Comrie discusses the Eskom, Tegeta saga with the SABC.
According to leaked minutes of an Eskom meeting on Friday, Eskom retaliated by threatening to approach the court:
“Legal counsel was instructed to prepare the interdict and a meeting was held with [Tegeta] this morning, to discuss actions to be taken. Verbal commitment [were] made by [Tegeta] at 12:30 that they will not stop the conveyor belt to [Hendrina]; Eskom requested written confirmation by 15:00 today. If it is not delivered urgent legal action will be taken,” the minutes read.
Tegeta’s threat to cut coal supply came just as Eskom discovered a massive miscalculation that over-estimated the size of Hendrina’s strategic coal stockpile – instead of the 26 days of coal Eskom thought it had for Hendrina, the actual figure as of Monday last week was just 10 days.
The missing 18 days’ of coal amounts to more than 50,000 tons – or just over 1600 trucks full of coal.
By Friday last week that number had dwindled to eight.
By Monday, it had sunk to seven and a source on the ground at Hendrina told amaBhungane that Eskom was preparing to burn the coal bed – the coal used to lay the foundation of a stockpile and which is normally contaminated with sand and stone.
This dire situation was spelled out in the leaked minutes from Friday’s meeting, but was corroborated by two independent sources on the ground in Mpumalanga and finally, at 3.30pm yesterday, confirmed officially by Eskom.
“Eskom has identified a risk in relation to insufficient coal at Hendrina Power Station. This risk is primarily due to the threat of sustained suspension of supply by Optimum Coal Mine, and that Optimum is not meeting their contractual requirements.
"This comes at a time when stock days are below minimum Grid Code requirement [of 20 days] ... The unexpected measurement of low stock days is still being investigated but could be due to deficiencies in stock day accounting.
"The previous assessment during October 2017 was 25 days,” Eskom spokesperson Khulu Phasiwe said in a written statement to amaBhungane.
If the situation persists, senior managers and board members were warned, Eskom may be forced to shut down the 2000MW Hendrina power station and either run the expensive open cycle gas turbines (OCGTs) or make peace with load-shedding.
According to the leaked minutes: “[Eskom’s primary energy division] has requested that this major incident be investigated independently by [Assurance and Forensic] … This is to be initiated at [Hendrina power station] and other power stations to check if it affects only one power station or others as well.”
However, the executives in the Eskom meeting noted that the discrepancy was so massive that fraud cannot be ruled out – “which is why [Assurance and Forensic] has been asked to verify the amounts and payments.”
However, Eskom says the crisis has in part been caused by Tegeta failing to deliver the 458,000 tons of coal it is contractually obliged to provide to Hendrina power station.
“One of the reasons for [the] coal stock pile levels is due to [the] supplier not delivering as per the contract … from April to end of October 2017, [Optimum’s] delivery is 388kT [388,000 tons] short for [the] period of 1 April to [the] end of October 2017, legal action is being pursued,” the leaked minutes read.
In addition to this, it is alleged by two sources – one from the power station, one from the mine – that Tegeta has been exporting coal from Optimum mine while at the same time starving Eskom of the coal it is legally entitled to.
This was one of the detailed questions put to Tegeta and Oakbay on Tuesday afternoon – by Wednesday evening no response had been forthcoming.
Tegeta’s attorney Gert van der Merwe confirmed that “if [Tegeta] has to supply coal under strenuous conditions, if they can’t make a profit” his clients may be left with no option but to cut supply to Hendrina.
As of Tuesday, Optimum’s conveyors belts were still delivering coal to Hendrina power station, but the source from the power station said the Gupta-controlled company had cut deliveries to almost zero, with only 1000 tons delivered over the weekend.
MPs react angrily to Tegeta's threat to Eskom (SABC News)
For now, Eskom is scrambling to find coal and is using five alternative suppliers that can truck in around 6000 tons of coal a day from other mines and other power stations. “This is not a sustainable solution,” the minutes read.
“To address this risk, Eskom is putting in place a number of urgent actions including to enforce performance of the Optimum coal supply contract along with consideration for replacement coal supply contracts for Hendrina…” Phasiwe said.
“Eskom is also working with National Treasury to place contracts for the supply and diversion of coal from other Eskom contracted sources to Hendrina. Despite the challenges being experienced at Hendrina, Eskom will ensure that the power system will not be compromised.”
Ironically, Gupta-owned media vilified Glencore for invoking the same hardship clause in their contract in 2015, accusing the multinational commodities trader of trying to blackmail Eskom with the threat of loadshedding.
Tegeta’s contract with Eskom does allow for the price paid for coal to be renegotiated if the mine is faced with financial distress, but Eskom has made it a cornerstone of their defence of the Guptas that Optimum’s new owners were the only company promising to keep delivering coal at R150/ton until the end of 2018.
During Friday’s meeting, executives admitted that Eskom should have seen this problem coming, saying in the minutes that Eskom faced a “reputational risk” from “this new issue arising from a Gupta linked company … especially considering the warnings on the non-viability of the coal mine.”
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