HomeIndustry SectorsFinance and PolicyEskom: State of Capture report update 1

Eskom: State of Capture report update 1

After the release of the State of Capture report last week, which claims to link Eskom’s CEO, Brian Molefe, with multiple acts of corruption, the utility’s management team said that it still receives support from its international counterparts.

Eskom receives vote of confidence

According to the utility, International lenders including the Deutsche Bank, as well as professional bodies such as the Progressive Professionals Forum (PPF), have come out in support of the stance taken by Eskom on its dealings with suppliers as well as the role it plays in the transformation of the coal industry.

Responding to the power company’s media briefing on Thursday, to clarify Eskom’s position regarding the Public Protector’s report and to reiterate its backing of the Eskom management, the Deutsche Bank expressed its confidence of the Eskom management team and the way it has handled the Tegeta coal contracts issue.

“Overall, the management sounded very confident and reiterated that all coal contracts and transactions discussed in the PP report were in compliance with Eskom’s procurement policies, consistent with requirements of PFMA and were preapproved by the National Treasury,” the bank said.

“We believe Eskom’s management has presented a strong case and the underlying transactions were seemingly in compliance with all internal and external requirements and were carried out keeping in mind the best interest of the company, investors and shareholders,” Deutsche Bank concluded.

In correspondence with Fin24 media, Deutsche Bank clarified that the statement from Eskom was based on an independent analysis from Deutsche Bank’s fixed income research team and was issued following a conference call with the utility.

The Bank declined to comment further.

Utility efforts remain credible

The Progressive Professionals Forum (PPF) has welcomed the report released by the parastatal and has also expressed that it is proud of the achievements, leadership and professionalism of Molefe manifested in outstanding service delivery and transformation in all his previous portfolios from PIC, Transnet and now Eskom.

“We are confident that Eskom is in great hands and support his commitment to black excellence and transformation,” the professional body said.

The body adds: “The sterling work by the Eskom board and executive is evident in its 15-month record of no load shedding that has stabilized the country’s power supply, a commendable feat considering its recent load shedding woes.

“PPF applauds the African Development Bank and the China Development bank for their confidence in Eskom demonstrated by providing the loan facilities.”

Utility insight on Glencore dealings

Following recent claims made in the media, which state that “Glencore is vehemently denying that it had ever proposed coal price increases of more than R300 ($22) per tonne to Eskom,” will be challenged by the utility.

The South African power company said over the weekend that “it is unfortunate that Glencore has suggested that Eskom has lied about Optimum Coal Mine wanting to increase the coal prices to ZAR570 ($42) per tonne.

“Following failed attempts by Optimum to renegotiate and extend the coal supply agreement for the Hendrina Power Station at prices higher than the ZAR150 ($11) per tonne contractual agreement, Optimum later proposed a ‘compromise deal’.”

The utility added:”In terms of the proposed deal, the coal supply agreement to the Hendrina power station would be renegotiated at ZAR300 ($22) per tonne until 2018, and thereafter be extended to 2023 at ZAR570 ($42) per tonne.

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 17 September 2015, when Optimum was under business rescue, they proposed a price increase of ZAR630 ($46) per tonne and a coal supply agreement extension until 2023,” the utility said in a statement.

The company added: “In that letter, the business rescue practitioners proposed a coal price increase of ZAR443 ($32) per ton with effect from 1 October 2015 to 31 December 2018. Thereafter the price would increase to ZAR630 per ($46) tonne until 2023.”

“Eskom 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 waivered. Nothing has changed since then even though Optimum Coal Mine is under new management,” the parastatal noted.

Ashley Theron
Ashley Theron-Ord is based in Cape Town, South Africa at Clarion Events-Africa. She is the Senior Content Producer across media brands including ESI Africa, Smart Energy International, Power Engineering International and Mining Review Africa.