ESKOM has reached a confidential agreement with mining giants Glencore and Xstrata that relates to their future supply of coal once the merger between the two companies is approved by the South African competition authorities.
The hearing into the $33bn merger started on Friday morning after a delay in December. Proceedings were delayed by more than an hour due to discussions between the parties and Eskom to bed down the agreement.
The Competition Commission, which had recommended a conditional approval of the merger, mainly relating to public interest issues, expressed concern about the fact that the agreement is clouded in confidentiality.
Deputy commissioner Thembinkosi Bonakele said in the commission’s opening address it was not desirable that something as important as the future coal supply to Eskom could be addressed by way of a secret agreement.
He urged the tribunal to find a way of putting the agreement into the public domain once it had accepted the agreement.
Eskom has decided to withdraw its application to intervene following the agreement reached with Glencore.
Mr Bonakele said the commission had an obligation to explain to the public how the issues that were initially raised had been addressed.
Eskom expressed concern about possible shortages in coal supply, a reduction in the quality of coal supplied to Eskom and a likely increase in the exporting of coal, with subsequent consequences for domestic prices of coal to Eskom.
Xstrata will become a wholly owned subsidiary of Glencore after the conclusion of the transaction. Xstrata is the largest seaborne exporter of thermal coal used to generate electricity.
The National Union of Mineworkers (NUM) has also reached an agreement with the merging parties regarding future retrenchments that are merger-related. The agreement boils down to no retrenchments for two years following the approval of the transaction and a cap on the number of retrenchments if there is a need for retrenchments after the two years.
Glencore and Xstrata are both listed on the London Stock Exchange and are both based in Switzerland.
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