Edition: June / Aug 2017
Editorials

ESKOM

Peculiar situation

Much more needs to be revealed about goings-on in the
background of arrangements being kept confidential.

Details are emerging about the R30m payout, described as a pension, to Eskom chief executive Brian Molefe (see Currents). With his return to the hot seat, his remuneration package (inclusive of the payout) is subject to review. A necessary reference point is an assessment of the value, to Eskom alone, from his previous service; specifically, whether there was value created or destroyed by his Gupta relationships.

Eskom is accordingly 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 that, 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;
  • Whether Molefe was Eskom chief executive at the time;
  • When the hearing was held;
  • The identity of the arbitrator;
  • How the arbitrator was selected.

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



Molefe . . . questions, questions

Further, Eskom’s argument offers insufficient ground to keep secret the background to the arbitration. Neither is there an obvious reason that those involved with the arbitration, and its terms of reference, need 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.

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.

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 agrees to waive the R2bn in penalties against Glencore. The second was that Eskom releases 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, this was probably because 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 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.