OAKBAY Investments has hit back at a newspaper report that said it received a lucrative prepayment from Eskom for coal, saying the system through which the power utility sources four-fifths of its coal requirements, involving companies such as Anglo American and South32, was “a gravy train”.
City Press reported on June 12 (Sunday) that South African power utility, Eskom, had paid R586m to Oakbay Investments, a Johannesburg-listed company owned by the Gupta family and Duduzane Zuma, the son of South African president, Jacob Zuma. The payment was made ahead of Oakbay buying Optimum Mine out of business rescue for R2.15bn.
Oakbay responded, however, saying that it understood prepayments to be a standard practice of Eskom, a view that Eskom supported in its own press release. Eskom said it had upfront capital payments due of some R38bn to companies that provide coal to its power stations on the so-called ‘cost plus’ model.
The cost plus model was an innovation of some decades at a time when Eskom was growing its fleet and the coal that it sourced was easier to mine.
The structure of the financial arrangement was that Eskom would pay the capital cost of the mine in return for exclusive, on-spec supply. Eskom would also pay for the coal at a percentage above its operating cost.
Brian Molefe, CEO of Eskom, and Brian Dames, his predecessor, expressed antipathy for the cost plus model saying the system had grown inefficient.
Molefe told Miningmx in June last year that were he to be appointed CEO of Eskom full-time, he would dismantle the cost plus system. “We want bread, but we shouldn’t get involved in discussions about where we get the oven and where are we going to build the bakery or how it is going to be built. We just want bread.”
He was also critical of past practices that didn’t suit Eskom given its heavy debt burden. “This thing of Eskom hiring geologists to go and do prospecting for coal .. that is not our business. I’m sorry,” he said.
Oakbay Investments, however, has poured more oil on the flames saying that whilst it supplied less than 5% of Eskom’s total coal supply, another 80% was from “… the same companies who have been supplying for decades, several on a ‘cost plus’ basis, which means Eskom funds both their operating costs and their capital costs – a gravy train all funded by South African taxpayers”.
“Why is media not interested in the decades of exploitation of South African taxpayers by the same major mining companies, via the cost plus model?,” said Oakbay.
