African National Congress (ANC) supporters march against Eskom and power cuts on Thursday in Soweto. Picture: AFP PHOTO/MUJAHID SAFODIEN
African National Congress (ANC) supporters march against Eskom and power cuts in Soweto. Picture: AFP PHOTO/MUJAHID SAFODIEN

ESKOM is buying coal for its Arnot power plant from a mine that is being bought by a company controlled by the Gupta family, after a contract with Exxaro Resources was cancelled, according to three people with knowledge of the situation.

Eskom did not renew Exxaro’s contract to supply Arnot from a nearby mine at the end of December, because it said prices were too high. Arnot was supplying 20% of the 2,000 MW power plant’s coal needs, according to the utility.

Optimum Coal, the mine now supplying Arnot, is being acquired by a company controlled by the Guptas, who are friends of President Jacob Zuma. The previous owner, Glencore, placed it under administration because it was running at a loss and Eskom would not relax the terms of a supply contract to the Hendrina power plant.

Tegeta, which is buying Optimum, is owned by the Gupta family’s Oakbay Investments, which controls the publicly traded Oakbay Resources & Energy.

The people asked not to be identified because they were not authorised to speak to the press.Tegeta official Jacques Roux did not answer calls to his mobile phone. Eskom spokesman Khulu Phasiwe said Arnot had been sourcing coal from other suppliers since the Exxaro contract expired, but said he had "no information" on the arrangement with Optimum.

Optimum has been supplying coal to Arnot since the beginning of the year, said the people. Optimum is selling 100,000 tonnes of coal a month to Oakbay, one of the people said.

Exxaro stopped operating at the end of the year and about 1,700 workers now risk losing their jobs, according to the National Union of Mineworkers. The company had not received offers for its Arnot mine, and was in discussions with unions over jobs, Mzila Mthenjane, Exxaro’s head of stakeholder engagement, said.

Mineral Resources Minister Mosebenzi Zwane and a Tegeta delegation met Glencore officials in Switzerland to negotiate the purchase of Optimum.

"Let me assure you that I’m not involved in transactions of anybody so far," Mr Zwane told reporters in Pretoria on Thursday. A Glencore spokesman declined to comment.

Tegeta agreed to pay about R2.15bn for Optimum, which has a fixed-price agreement to supply Hendrina with 5.5-million tonnes of coal annually running until 2018. The payment will cover most of Optimum’s R2.55bn in debt, including an Eskom fine.


Read about Mr Zwane's Gupta trip, in the latest Financial Mail, here