Johannesburg – The Zondo commission has heard how former Eskom CEO Brian Molefe had refused to renegotiate a coal supply agreement (CSA) with mining giant Glencore days after he took over the leadership at the power utility.
Former Glencore CEO Clinton Ephron has detailed how Glencore had taken over ownership of Optimum Holdings which owned Optimum coal mine in 2011.
Eskom had a 25-year agreement with Optimum Holdings when Glencore took over ownership. The mine supplied coal to Eskom’s Hendrina power plant.
Ephron explained that at first Optimum Holdings which was under different ownership had a cost-plus contract agreement of coal supply with Eskom. It was later changed to a fixed priced agreement.
Ephron said in 2013 Optimum had run into financial issues and it was decided that the Glencore would use a clause in the coal supply agreement to try and renegotiate the agreement with Eskom. Eskom’s then-leadership were willing to negotiate and Ephron along with a Johan Bester, a representative from Eskom, negotiated a new deal. The new agreement would have seen the contract between Eskom and Optimum extended by a further five years ending in 2023 instead of December 2018.
In 2015, a deal was agreed to and before the deal was to be signed, it had to undergo various processes at Eskom for approval by the board tender committee and executives.
In 2015, Molefe joined Eskom and Ephron arranged a meeting with Molefe regarding the progress of approving the CSA agreement.
Ephron met with Molefe at his office at Eskom in May 2015. He said Molefe told him that Eskom would not be renegotiating a new agreement with Optimum coal mine. Ephron said he was shocked by Molefe’s stance and questioned him.
Molefe said Eskom would continue to protect its interests and would not renegotiate a new agreement until the one underway is concluded in December 2018.
Ephron told the commission that Molefe did not elaborate on why Eskom would not renegotiate even in letters written to him and in meetings held between Glencore and Eskom.
"Mr Molefe said Eskom would not renegotiate and that it would continue to enforce its rights in terms of the contract and that no amendments would be considered until the end of the contract. I was devastated," said Ephron.
"The was optimism from both sides (when the contract was renegotiated) that the deal would be approved," said Ephron.
The former CEO said that it was unclear why Molefe refused as the lapse of the agreement would have put Eskom in a disadvantaged position with Hendrina power plant unable to get coal from Optimum. This fact was communicated to Molefe.
Advocate Vincent Maleka, for the commission’s legal team, read out former mineral resources minister Ngoako Ramatlhodi statement. The former minister had told the commission that he had been approached by former Eskom board chair Ben Ngubane and Molefe who asked him to close down Glencore’s mines.
Ramatlhodi said he was told former president Jacob Zuma wanted this done before he left the country at the time.
The former minister told Ngubane and Molefe that he could not do that as the proper processes needed to be followed first.
Ramatlhodi was later fired as a minister and replace by Mosebenzi Zwane who has been accused of assisting Gupta owned Tegeta to purchase Optimum from Glencore.
The inquiry continues.