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Gupta-Zuma Company to Hold Three Eskom Coal-Supply Contracts

Tegeta Exploration & Resources (Pty) Ltd., the South African company owned by the Gupta family and a venture fund in which President Jacob Zuma’s son is an investor, will hold at least three supply contracts with the nation’s power utility once its takeover of a Glencore Plc unit is completed.

Glencore’s Optimum supplies Eskom Holdings SOC Ltd.’s Hendrina power station and is contracted to do so until 2018 even after a change in ownership, Khulu Phasiwe, a spokesman for the Johannesburg-based power-utility, said by phone on Monday. Optimum also supplies Eskom’s Komati plant from the Koornfontein colliery, while Tegeta has an existing deal to send coal to the Majuba plant from its Brakfontein colliery, he said.

“The political association and affiliation is not a major priority for us,” Phasiwe said. “Anyone in the country who can give us coal at the right volumes at the right price and at the right quality -- if you can meet those three criteria, then we have absolutely no reason why we shouldn’t do business with you.”

The Guptas have agreed to buy Optimum from Glencore for 2.2 billion rand ($136 million) to expand a business empire spanning computer equipment, media and mining built since 1993, when Atul Gupta arrived in South Africa from Uttar Pradesh, India. He runs the businesses together with his brothers Ajay and Rajesh.
Oakbay Investments

Tegeta supplies 2.4 million tons of coal a year to the Majuba power plant from Brakfontein, while the Komati plant receives 166,000 tons a month from Koornfontein mine, Yolanda Zondo, a spokeswoman for Oakbay Investments, which holds the Gupta’s stake in the company, said in an e-mailed response to questions.

Tegeta will continue to supply Hendrina with with 5.5 million tons of coal annually at 150 rand a ton following completion of the Optimum deal, Zondo said.

A separate deal with Eskom’s Arnot plant lapsed at the end of January for fuel priced at less than 500 rand per ton, she said. The supplies were delivered at 406 rand a ton, Johannesburg-based newspaper City Press reported on Sunday.

The Koornfontein colliery will be able to bid for a long-term supply deal to Komati once the transaction is completed, Eskom’s Phasiwe said. Eskom burns almost 120 million tons a year of coal supplied by South African producers, figures posted on its website show.

South Africa’s Competition Commission has conditionally approved Tegeta’s purchase of Optimum, Oakbay Investments said in a Feb. 12 statement.

“As the Commission’s recommendation states, the transaction will not substantially prevent or lessen competition in the thermal coal market,” Nazeem Howa, the chief executive officer of Oakbay, said in the statement.

source: http://www.bloomberg.com