Eskom Media Release

Eskom’s Gupta coal saga warrants absolute transparency

Eskom Gupta coalAfter careful scrutiny of the prevailing facts surrounding the closure of Arnot colliery and the rerouting of Optimum coal to Arnot Power Station, OUTA spokesman, Ted Blom, has emphasised the need for absolute transparency regarding all Eskom procurement practices.

Several glaring facts suggest that this transaction is highly irregular, some of which include the following:

  1. The fact that Eskom has had more than 5 years to recapitalise Arnot colliery and that Eskom has neglected to engage meaningfully with Arnot since 2004 when the issue of Life Extension was visited.
  2. The fact that Eskom even mentions that the final invoices for coal from Arnot exceeded R1000 per ton is of concern. The Eskom Board should know all too well the price per ton on bulk coal mining will increase at the end of a mine’s life and to compare this cost of a reducing tonnage profile with any other operation is questionable.
  3. Eskom has indicated its procurement of “export quality” coal which trades at a “premium” from Optimum which is ludicrous. Both Arnot and Hendrina power plants require 21CV grade coal as per Eskom’s own specification sheets and both stations operate on 1971 technology. Damage would be done to the boilers at these power plants if export quality coal was used.
  4. On a delivered basis, Eskom appears to then be paying above R27 per Giga Joule – which probably at a 50% premium to the inland market price for the required grade of coal needed at Arnot.
  5. Eskom claims that they merely prepaid the Guptas for the coal, however, this is disingenuous as Optimum Colliery did not belong to the Guptas on the date that Eskom made the R580 million payment to the Guptas. One can only prepay for coal by paying the owner, not the prospective owner. The pre-payment for coal is however a questionable practice.
  6. This transaction appears highly irregular, and probably transgress the PFMA and Treasury rules.

The above does not bode well for Eskom who despite several announcements since 2009 proclaiming that it would stimulate the development of 40 new collieries by 2015, has failed to establish a single new colliery. This despite two industry studies warning Eskom of the pending “Coal cliff” which will put Eskom into a very difficult situation, has apparently has now hit Eskom. The situation is expected to deteriorate rapidly over the next 5 years, and if Eskom’s current imprudent behaviour is extended unchecked, will costs the SA electricity consumer dearly.

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