Eskom paid Gupta mine millions for coal it couldn’t even use – report

Eskom forked out more than R130 million to a Gupta-owned mining company for coal the power utility couldn’t even use, according to a report in the Sunday Times, citing a National Treasury investigation.

The paper said that controversial family threatened legal action in a bid to stop the Treasury from making the report public.

On Saturday, the Gupta family said it will will dispose of the stakes it holds in South African businesses before the end of the year, following numerous allegations of attempted state capture, which the family has rejected.

The report showed that Eskom signed a 10-year coal supply deal with Tegeta Exploration and Resources worth R400 million, for coal that both parties knew was out of specification.

Treasury requested comment from Eskom CEO Brian Molefe on the report he received  – dated 12 April 2016.

This includes responses to damning findings which show that:

  • Eskom considered Tegeta’s proposal in 2014, despite the company not having a water use licence;
  • Eskom negotiated a price for blended coal not suitable for its power stations;
  • There is no evidence Eskom ensured Tegeta adhered to or complied with legislative requirements;
  • Eskom failed to provide a system-generated list of payments made to Tegeta, but the Treasury found that it paid the company R134 million for coal;
  • Eskom allowed Tegeta to supply coal that did not conform to contracted standards;
  • Eskom failed to take remedial action after tests conducted by the South African Bureau of Standards showed that Tegeta’s coal was out of specification.
  • Eskom accepted an inflated price for coal from Tegeta.

Treasury chief procurement officer Kenneth Brown gave the power utility until April 30 to respond, but the Sunday Times reported that two government sources said that the power utility did not respond.

Tegeta claimed that Treasury ignored its suggestions to assist the government with “facts” and “accuracy” before making the report public.

The latest revelations come after the Sunday Times published a series of articles in 2015 showing how Tegeta received preferential treatment from Eskom, despite its sub standard coal.

The Treasury’s report also revealed that a third round of tests conducted by Eskom showed the coal was out of specification.

In his report, Brown wrote: “SABS results further revealed that seven samples that were tested contained sulphur that was higher than the rejection limit of 1.3% and [the] worst sample contained more than 2% of sulphur content.

“There is no evidence that Eskom implemented any remedial action after receiving SABS test report[s].”

Read the full article in the Sunday Times 28 August 2016 edition.

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Eskom paid Gupta mine millions for coal it couldn’t even use – report