Claims of prepayment to help finance Gupta deal rejected

Eskom has rejected claims its R587m prepayment to Tegeta Exploration and Resources for the provision of coal was made so that the Gupta-owned company could gather funds to buy Optimum Coal from Glencore.

Optimum supplied Tegeta with the coal needed to fulfil the Eskom contract.

The prepayment was allegedly made hours after several banks had declined to provide Tegeta with the R600m shortfall for the R2.15bn purchase of Optimum Coal.

Daily Maverick reported on Friday that Eskom executives had agreed on the R587m prepayment during a special latenight tender committee meeting on April 11, and that Tegeta had used this money two days later to help pay for Optimum Coal.

The report read the Eskom decision was made six hours after the banks had refused to give the Guptas a R600m loan for the purchase.

“The fact that Eskom also agreed to pay the money up front reinforces the impression of preferential treatment,” Daily Maverick’s article read.

It based its story on a report by the business rescue practitioners for Optimum Coal, Piers Marsden and Peter van den Steen, and on leaked minutes of Eskom’s meeting.

Tegeta admitted that the prepayment was used to fund the acquisition of Optimum but insisted that it could have obtained finance from other sources and that it had not used the prepayment inappropriately.

Eskom spokesman Khulu Phasiwe insisted on Sunday that Eskom’s decision-making on the coal contract had occurred long before the decision to make a prepayment.

Oakbay Investments said the prepayment by Eskom to Tegeta in April 2016 “was perfectly legitimate and [that] Tegeta was entitled to do with the proceeds as it saw fit”.

“The prepayment was agreed against onerous provisions including a 3.5% discount in favour of Eskom, securities in place, due delivery of the required coal and strict quality compliance criteria,” Oakbay’s statement read.

Phasiwe said Eskom had approached Umsimbithi and Tegeta in April because of threats to the security of its coal supplies during winter.

“Both suppliers were able to meet Eskom’s requirements for additional coal quantities at the required coal quality that resulted in approval for the extension of both contracts by the board tender committee on April 11 2016.

“Tegeta and Umsimbithi were the only companies able to deliver the additional tonnage of the required coal, to mitigate the risk of load shedding during winter,” Phasiwe explained.

“Tegeta indicated that the required coal quality could only be sourced if they diverted their export quality coal to supply Eskom. In addition, there was an indication that additional equipment was needed to reach the required tempo of coal delivery to Eskom that would mitigate the shortfall,” Phasiwe said.

“Tegeta mentioned these as the factors that led the company to request a prepayment from Eskom.

“Umsimbithi indicated that they were able to supply additional coal with no additional resource requirements.

“The Tegeta prepayment request was considered on its merits, which were the current security of supply risk circumstance and previous transactions of a similar nature.

“We can confirm that the full amount of the prepayment to Tegeta has been recovered via coal delivered to Eskom by the end of August 2016.

“During this period of time Eskom had sufficient security in place to cover any potential default by Tegeta.

“These transactions have enabled Eskom to commit to no load shedding during the winter peak period,” Phasiwe said.

DECISION TAKEN SIX HOURS AFTER BANKS REFUSED TO GIVE THE GUPTAS A LOAN