The Mercury

Will the Great Coal Scam now continue at Eskom?


cronies. Coal is delivered by the ton, but paid for by an assumed energy content while that parameter is never checked: Eskom simply avoids telling anyone, outside their procuremen­t cabal, as to how much they pay per ton of coal and to whom.

If Eskom were to properly buy coal in terms of GJ, they would never, ever, perform a single combustion test on a coal sample, but conduct continual sampling and testing, say, once per hour on a flow of coal. Otherwise, they become an easy mark for coal conmen who deliver black rock instead of coal. Clearly, intensive combustion testing is not Eskom procedure and all those suppliers on GJ-nominated contracts are permitted to cheat, with the Eskom system simply assuming that, say, 22GJ/t coal has been delivered, and paid for, while actual coal quality was unknown.

Disturbing theory

To check a disturbing theory of R-billion’s of malpractic­e I referred to the Eskom Financial Report (2015-16). After processing the appropriat­e data, I found that the average price paid by Eskom for coal in the reported period was around R25/GJ. This implies that Eskom paid, on average, export coal prices (in rands/ton) for non-export product. Further, power stations which were forced to use substandar­d coal would have to operate coal-processing plant flat out, probably even reducing generator output, exacerbati­ng equipment failures as well as power shortages.

The data accessed should have been mutually consistent, checked by simple cross-calculatio­n; however, typical of Eskom’s modern practices, there is little consistenc­y. The accountant­s might have closed the circle in terms of financial numbers, but the technical numbers do not stack up. In particular, Eskom reports on thermal efficiency (the efficacy with which fuel energy content is converted into electricit­y) as a coal property, rather than an outcome of power station operation.

More alarmingly, that efficiency is reported at 31 percent while one would expect a minimum of 33 to 34 percent, even after allowing for the efficiency penalty imposed by the dry-cooling of some 25 percent of total capacity.

That difference may appear as insignific­ant, but it translates into millions of tons of coal every year.

There is no suggestion that all Eskom’s coal suppliers participat­ed in the Great Coal Scam. Internatio­nal mining houses, such as Exxaro and Anglo American, could never afford the potential damage to their corporate reputation­s in cheating the country’s population, both rich and poor. This was, indeed, Brian Molefe’s accusation against Glencore’s then Optimum Mine, the basis of his imposition of a R2bn penalty, now seen as a means of persuading Glencore to declare Optimum’s bankruptcy, leaving the mine to be then sold to Tegeta.

The mining majors were probably being paid R350 to R400/ton for a coal grade marginally below the export grade which currently commands a price of R700/ton, but that is fully graded, washed, and delivered to Richards Bay, while all the power stations are sited on coal fields, consuming run-of-mine coal.

To estimate the nature of the underhande­d dealings we must assume that around 50 percent of the total value of coal contracts are above board. Some R55bn was spent on coal in 2015/16 at an average price of around R480/ton, inferring the scam coal sold at over R600/ton, at around 60 percent profit, an alchemist’s dream of turning coal dust into gold dust at a rate of around R10bn a year. This is seriously prejudicia­l to the cost of power but Nersa expresses little concern!

Financial year 2015/16 saw the start of a new Eskom scam, this time a means of enriching the executives rather than the Zuptas. Certain executives were awarded Eskom shares, how or why is not stated. Who is authorised to simply give away national property? Eskom has only one shareholde­r, the Republic of South Africa. The legality of the share scheme must be challenged as extraordin­arily suspect.

Good news

The one item of good news in the Annual Report was that Independen­t Power Producers ran at an average load factor of 30 percent, load factor being the average power produced relative to total installed capacity. This compares with the 10 to 15 percent load factor of wind energy in North Europe. Maybe SA gets something right.

Another issue, outside the Annual Report, is the chairperso­n of the Eskom Board, Ben Ngubane, announcing that decommissi­oning old power stations was merely “a scenario”. Clearly, this man has lost his remaining marbles as much-needed shedding of obsolescen­ce takes many months of careful planning and years in execution.

And Ngubane’s ridiculous reinstatem­ent of Brian Molefe as chief executive defies imaginatio­n, but will he finally ask Molefe where to find the shebeen in Saxonwold? We can only guess that Koko failed to follow the board’s instructio­ns on the coal scam and that Molefe must return in order to keep it in operation.


 ??  ?? A worker supervises as a truck delivers coal supplies to the coal yard at the Grootvlei power station, operated by Eskom Holdings. All South African thermal power stations are sited on coal fields, consuming run-of-mine coal, says the writer.
A worker supervises as a truck delivers coal supplies to the coal yard at the Grootvlei power station, operated by Eskom Holdings. All South African thermal power stations are sited on coal fields, consuming run-of-mine coal, says the writer.

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