Eskom Seeks Alternative Amid Tegeta Supply Threat at Power Plant

(Bloomberg) -- South Africa's power utility said it's looking for alternative fuel supply for the coal-fired Hendrina power station after its main provider, a mine linked to the politically connected Gupta family, threatened to stop deliveries.

“They wanted to increase the price,” Eskom Holdings SOC Ltd. spokesman Khulu Phasiwe said Thursday by phone. The utility has an agreement with the Optimum mine, owned by Tegeta Exploration & Resources, to supply coal at 150 rand ($11) per ton through December 2018 and the miner must adhere to that, he said.

Tegeta is owned by Oakbay Investments, a holding company controlled by the Gupta family, which is at the center of allegations they used a friendship with President Jacob Zuma to secure deals from the government and state companies.  The Guptas and Zuma have denied wrongdoing. 

Oakbay agreed in August to sell Tegeta for 2.97 billion rand ($218 million) to closely-held Charles King SA, a Swiss company it said is owned by Amin Al Zarooni. The sale was subject to regulatory requirements and other conditions and expected to be concluded in 12 months, Oakbay said at the time.

Eskom last week found Hendrina, located in the Mpumalanga province, had about 10 days' worth of stock, which was an “unexpected” drop from the 25 days accounted for in October and below minimum requirements, Phasiwe said. The investigative journalism group amaBhungane first reported Tegeta's threat to shut down supply to the 2,000 megawatt plant.

Gert van der Merwe, a lawyer for Tegeta, said by phone that he had advised Tegeta not to operate at a loss, but didn't know if the Hendrina contract was unprofitable.

Eskom is taking measures including working with National Treasury to place supply contracts and divert coal from other sources to Hendrina, Phasiwe said.

To contact the reporter on this story: Paul Burkhardt in Johannesburg at pburkhardt@bloomberg.net.

To contact the editors responsible for this story: James Herron at jherron9@bloomberg.net, Liezel Hill, John Bowker

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