Gupta and Zuma-owned Tegeta Resources and Exploration is prepared to fight Eskom over a R2bn fine it inherited from Glencore when it bought Optimum coal mine this year.
“We’re going to fight it, based on the evidence we’ve been shown now. So it’s going to be a wonderful fight between us and Eskom,” Oakbay Investments CEO Nazeem Howa told Carte Blanche in a programme aired on Sunday.
Eskom confirmed last week that its claim against Optimum for R2bn relating to out of specification coal delivered remained in place.
“Eskom has vigorously pursued this claim with the previous owners of Optimum, registered its rights with the business rescue practitioners and also indicated its intention with the new owners of Optimum, being Tegeta, that Eskom will be pursuing this claim,” Eskom said in a statement.
Tegeta is owned by Oakbay Investments and Mabengela Investments, which is owned by the Guptas. President Jacob Zuma’s son Duduzane holds 45% shares in Mabengela.
When Tegeta acquired Optimum from Glencore on April 14 for R2.15bn, questions were asked why they bought it knowing there was a R2bn fine that the company in business rescue owed Eskom.
As it turned out, the Guptas did know about the fine when they bought the company, Howa said, adding that “it’s a huge amount of money”.
Legal case prepared for Tegeta
Explaining the “battle between Glencore and Eskom”, Howa said Glencore had prepared a legal case for Tegeta to use against Eskom.
“Glencore has provided us with a wonderful legal case they’ve prepared,” he said.
When Eskom refused to budge on signing a new contract for Optimum to supply Hendrina Power Station with coal until the R2bn fine was paid in 2015, Glencore was forced to place Optimum into business rescue in August.
“Glencore disputed it (the fine and) wanted to go to arbitration and then business rescue happened,” said Howa. “In terms of arbitration that business rescue was put on hold.”
The business rescue team told Howa that the penalty – if anything – should be significantly lower. “Glencore has engaged some of the best and finest specialists to look at this matter,” said Howa.
“I don’t think we knew enough about the penalty at that stage (when they decided to buy Optimum),” he said. “First you get to a kind of agreement and then you do a due diligence.
“In the due diligence, we came across it, so we knew it was there. Let’s see how the arbitration goes. That’s the nature of business. We’ll take our chances on that one.”
R586m new coal deal for Guptas
The Carte Blanche interview came after the programme’s segment the previous week on Optimum’s new coal deal with Eskom.
Last week, Eskom’s group executive for generation Matshela Koko admitted that Eskom had agreed to prepay R586m to the company.
Confronted with evidence of the prepayment agreement, Koko had to apologise to Carte Blanche journalist Devi Sankaree for making a “mistake”.
After at first denying the prepayment, he said: “Let’s say I made a mistake.”
City Press reported last Sunday that in April Eskom awarded the contract to Tegeta to supply the Arnot power station with 1.2 million tonnes of coal over six months. Tegeta received this contract after a nine-month delay by Eskom in awarding a permanent supply contract to replace an Exxaro contract that had expired at the end of 2015.
The issue around the coal contracts is linked to a question some have been asking: How did Oakbay and Tegeta fund the deal to buy Glencore’s Optimum Coal mine for R2.15bn?
“The prepayment deal is particularly controversial because it appears to have been signed just days before Tegeta unexpectedly came up with R2.15bn in funding to buy Optimum mine,” City Press journalist Susan Comrie wrote last Sunday.
However, Howa countered this concern last week, when he gave some clues to Fin24 about how he says Oakbay funded the acquisition.
“It was done through a combination of banks, debt and our own internal funding,” he said.
“We approached the local banks in December last year,” he said. “None of the local banks would help us. So we went to a foreign bank.”