Gupta probe is ‘usual’

Johannesburg – The probe into the Gupta-linked Tegeta’s purchase of Glencore’s Optimum Coal Holdings is usual when large mergers take place.

Bloomberg reported on Tuesday that the investigation, by the Competition Commission into the acquisition of Optimum Coal Holdings by Exploration and Resources for R2.15 billion, is part of normal procedure concerning mergers and acquisitions.

The wire service said the commission, which oversees mergers and acquisitions as well as probes anti-competitive activity, was told about the deal in December.

The controversial Guptas are friends of President Jacob Zuma.

Also read: Commission set to probe Gupta deal

Business Report reported on Tuesday that the commission had received submissions from various stakeholders raising concerns about the deal.

As a consequence of the deal, the Gupta mine is now providing Eskom with coal for its Arnot power station. The mine, which went into debt rescue last year, provided 15 percent of the power station’s needs in January.

Also read: Molefe wades in to defend Eskom

The renewal of coal supply to Arnot comes after the mine’s previous owner, Glencore, stopped sending the commodity to mine because Eskom refused to renegotiate coal prices. Glencore at the time said that Eskom was responsible for the mine’s financial woes.

Eskom and Glencore ended up in a legal dispute after the power utility slapped it with a R2 billion penalty because Optimum was exporting good-quality coal and not sharing the commodity with Eskom.

Glencore, however, refused to bow down to the utility, arguing that paying the penalty would result in its effectively exporting coal at R1 a ton.

Eskom and Glencore’s coal deal dated back to 1983, but Glencore last year wanted it renegotiated because it was supplying coal to Eskom at a cost significantly less than the cost of production for a number of years. In an August statement, Glencore said Eskom was responsible for its financial woes, which Eskom later denied.

Optimum was contracted to supply 5.5 million tons a year to Eskom, just more than half its total annual output. The deal was subsequently cancelled by Glencore when the utility refused to pay more for the coal and the mine went into business rescue.

The business rescue practitioners subsequently put the ailing mine up for sale and, in December, the Gupta family bought the mine through a subsidiary.

Business Report revealed on Tuesday that one of the interested parties, the National Union of Mineworkers (NUM), last week wrote to the commission urging it to probe the conduct of the merging parties involved in the deal. It said the commission should investigate the secrecy that shrouded the transaction from the start.

The NUM wants the conducts of Optimum Coal mine, its shareholders, the business rescue practitioner and the acquiring entity examined in the light of the NUM, as a majority labour union at Optimum, not being consulted about the disposal of the assets.

Meanwhile, the Tegeta transaction was facing a legal challenge from Endulwini Mining, a company that is owned by SA Mining Development Association chairman Peter Temane, acting in his personal capacity, and Sipho Dube.

Also read: Glencore faces court over Gupta deal

Although Tegeta defended the deal, which the business rescue practitioners said was the best option for the mine, Endulwini made a firm offer to purchase the Optimum mine by August.

Despite Endulwini putting a firm $200 million (R3.17bn at yesterday’s rate) offer on the table, it lost the bid to Optimum, which clinched it for R2.15bn.

Advertisements