Eskom and Tegeta taken to court over coal contract

The Special Investigating Unit (SIU) has taken Gupta-owned mining company Tegeta and Eskom to court over a controversial R3.7-billion coal supply contract, the City Press reported.

The SIU has reportedly asked the Pretoria High Court to declare the deal unlawful and invalid, and is pushing for the two companies to pay punitive costs for their involvement.

“Given the disgraceful conduct evidenced in this application, and the pervasive corruption, abuse, lack of candour and nondisclosure, the scale of the costs order should be punitive,” the SIU said in its court filing.

The investigation into the coal contract between Eskom and Tegeta was based on former public protector Thuli Madonsela’s state of capture report and Treasury’s report on the two companies.

In its court filing, the SIU states that Eskom exploited a coal procurement mandate to award coal supply agreements to Tegeta between 2013 and 2015, allowing the Gupta-owned company to dictate the terms of the deal.

After the appointment of the Gupta-aligned board at Eskom, the power utility reportedly awarded a coal supply contract to Tegeta for low-quality coal to be provided at inflated prices.

Despite the incompatibility of the coal with Eskom’s Majuba power station in Mpumalanga, the power utility extended Tegeta’s agreement until 2025.

Load-shedding and coal crisis

Eskom recently began implementing load-shedding to compensate for the lack of usable coal in its reserves, and plans to continue with this strategy in 2019.

The power utility also warned of nationwide electricity outages due to a serious decline in coal stockpiles at a number of its power stations.

Besides pervasive load-shedding, Eskom has incurred a debt of around R419 billion – which experts say the country will have to assume in order to keep the state-owned enterprise functional.

While the company has begun cutting staff to reduce its costs, it has stated it will need to increase electricity tariffs by as much as 90% over the next three years to stay afloat.

Now read: Eskom should sell its power stations

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Eskom and Tegeta taken to court over coal contract