Stockpile: Coal stores at the Grootvlei power station, operated by Eskom in Grootvlei, Mpumalanga. Picture: BLOOMBERG
Stockpile: Coal stores at the Grootvlei power station, operated by Eskom in Grootvlei, Mpumalanga. Picture: BLOOMBERG

Eskom has been invited to offer evidence that the “private arbitration” between itself and Tegeta Exploration & Resources — over the R2bn penalty imposed by Eskom on Optimum Coal Mine when it was owned by Glencore — existed at all.

It can do so by providing information which, irrespective of any arrangement to set up the “private arbitration”, should be in the public domain:

• Who instigated the “private arbitration”, and on what date?

• Was Brian Molefe Eskom chief executive at the time?

• When was the hearing held?

• Who was the arbitrator? and

• How was the arbitrator selected?

Eskom has already said it cannot disclose the “contents of the agreement” (the settlement amount) because the arbitration was private. However, the contents of an agreement can normally be divulged with the consent of the parties to it.

Further, Eskom’s argument offers insufficient ground to keep the background to the arbitration secret. Neither is there an obvious reason for those involved with the arbitration, and its terms of reference, to also remain a mystery, even to government which, through the department of public enterprises, is its shareholder.

What must be put to rest is any suspicion that “private arbitration” is a euphemism for a quiet discussion, effectively between Molefe and representatives of the Gupta family, newly the main owner of Tegeta. It would be easy for Eskom, if it wanted, to dispel any doubts.

The doubts arise from perusal of the share contract in which Glencore agreed to donate Optimum to Tegeta subject to two conditions. The first was that Eskom agreed to waive R2bn in penalties against Glencore. The second was that Eskom released Glencore from its guarantee for all obligations owed by Optimum (in business rescue) to Eskom.

These conditions were clearly met, because the contract proceeded to implementation. Moreover, it’s reliably understood that Eskom had waived its R2bn claim against Glencore and released Glencore from its guarantee obligations for zero consideration. In that event, what was there to be arbitrated between Eskom and Tegeta?

Glencore’s donation to Tegeta of its shareholding in Optimum, reputedly at the insistence of mineral resources minister Mosebenzi Zwane, implies that Eskom wrote off a R2bn asset for which Glencore was good. This was probably a result of Eskom’s abandonment of the Glencore obligations without having demanded any alternative value or security.

A write-off of R2bn would obviously be reduced by the amount settled in the “private arbitration”, if indeed there was such an amount and Tegeta has indeed paid it. Even had Tegeta paid, say, R500m, it would still leave a R1,5bn write-off. Add to this the R650m in an advance payment by Eskom to Tegeta, allegedly for coal to be supplied by Optimum, and it seems pretty evident that Eskom was keen to pursue the Tegeta deal with unbridled enthusiasm.

Little is left to the imagination.

Greenblo is editorial director of Today’s Trustee, a quarterly magazine mainly for principal officers and trustees of retirement funds

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