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The witch trials of Megawatt Park

An executive position at Eskom is the kiss of death for a career.

Matshela Koko, the former acting CEO of Eskom once described as ‘the face of corruption’, recently tweeted out a chart showing operational performance under different Eskom management teams.

The chart shows power generation performance, which has been in steady decline since 2000 but improved sharply once Koko and then-chair Brian Molefe took over. Load shedding also stopped during their tenure between 2015 and 2017.

Performance has just as abruptly taken a turn for the worse since Jabu Mabuza and Phakamani Hadebe have taken control of the electricity company. The chart is extremely flattering to Koko and Molefe.

Source: Matshela Koko (via Twitter)

Koko and Molefe were maligned in the press and by political parties as ‘Gupta stooges’. The deal that sank their careers at Eskom was a coal supply agreement concluded with Gupta-owned Tegeta (now in business rescue), which was presumed to be corrupt. Glencore, the former owner of Optimum Coal Mine, became a forced seller when it was slapped by Eskom with a R2.1 billion fine for the supply of sub-standard coal to Hendrina Power Station. In stepped the Guptas, who, with no money of their own, managed to pick up Optimum with a R1.6 billion guarantee from Eskom and a coal pre-payment of R658 million.

On the face of it, it looked dirty as all hell. Eskom had acted as an enabler in what amounted to the theft of a key Glencore asset.

Reality is somewhat more nuanced. Firstly, the Eskom fine has not gone away but may end up being substantially less than R2.1 billion, as Optimum – now also in business rescue – hunts for a new buyer who will want to make peace with Eskom. Secondly, Eskom’s coal costs had been escalating at 17% a year since 2008 and Koko made it a priority to bring this under control. He contacted Eskom’s mining suppliers and laid down the law: the average delivered cost was to be no more than R437 per ton, which was the average cost of good quality coal for Eskom at the time.

He saw an opportunity to rein in runaway coal cost increases. He decided against extending the Exxaro contract at Arnot Coal Mine, which was being trucked in at a cost to Eskom of R1 135 per ton. Then he locked the Guptas into a price of R160 per ton, a ridiculously low price that did not even cover the mine’s production costs. Eskom’s coal cost escalation dropped from 17% in 2015 to 3.5% in 2016, the first time in eight years that it had achieved a below-inflation escalation. The prepayment of R658 million was the carrot used to lock in this low price.

This was great for Eskom, but surely Koko knew this could end up bankrupting Optimum?

“My job was to look after the interests of Eskom, and this is what I did. I knew this would hurt Optimum, but I also know coal prices are cyclical. Eskom uplifts lower quality coal from our suppliers, who also export their higher quality product. They need to sell lower quality coal to Eskom to expose the higher quality coal that goes to the export markets. We didn’t share in the good times when they were getting more than US$100 a ton on export markets, so why should we cover their costs when times are hard?”

‘All sorts of vested interests’

Koko also refused to sign renewable energy bid window 4 contracts at the time when the cost of renewable energy was 215c per kilowatt hour (kWh) and coal could produce the same electricity for 32c (currently 45c) on the grounds that it would bankrupt Eskom. “I was under pressure from all sorts of vested interests to sign these renewable energy contracts, but I knew I would be scapegoated later if I signed these. I refused, and I was right to do so. The cost of renewable energy to Eskom is R10 billion and by 2021 the total cost will be R100 billion, which it cannot afford.”

There is no doubt that Eskom has been steeped in corruption and irregular expenditure, and we have several official reports that tell us that. Most recently, the Special Investigating Unit (SIU) brought a case before the Pretoria High Court in December last year seeking to cancel Tegeta coal contracts with Brakfontein coal mine on the grounds that they violated the Constitution, the Promotion of Administrative Justice Act and Eskom’s own internal procurement procedures.

Koko points out that the contracts under question in this case date between 2013 and 2015, before his tenure as acting CEO.

The Tegeta coal contract was not put to open tender. The SIU argues that a minimum of three bids from qualifying suppliers should have been solicited. Instead, the contract was concluded on the basis of a closed tendering process, comprising just one bidder – Tegeta. Closed tendering may only be applied in specific circumstances, for example where only one or two companies can provide a specific product. Nor did the Tegeta contract meet the requirements for emergency tendering (such as when power outages are likely to result if coal is not immediately supplied).

The SIU case details some of the background to the Eskom crisis. In January 2008 Eskom was forced to declare an emergency when coal stocks at some power stations dropped below the acceptable minimum of 20 days. Stocks dropped to as low as five days at some power stations. That emergency resulted in contracts being concluded for the delivery of 491 million tons of coal at a rate of R335 per ton and an average coal quality of 18.4 megajoules per kilogram.

The Public Protector’s 2016 report into state capture found that six of Eskom’s eight board members appointed by the then public enterprises minister had Gupta ties.

In 2014, Tegeta made approaches to supply Eskom with coal from its Brakfontein mine, notwithstanding its lack of adequate BEE shareholding and an outstanding fine for environmental violations. Eskom indicated that it would only be able to purchase coal from Brakfontein from April 2015. Tegeta secured an agreement for the supply of 65 000 tons a month, later increased to 100 000. Four months after the appointment of the ‘Gupta-aligned board’ in March 2015, Eskom signed a R3.7 billion contract with Tegeta for the supply of coal from Brakfontein, despite its lack of BEE compliance and a water licence. Some of the coal was also sourced from a part of the mine that failed to meet Eskom’s compliance requirements.

A National Treasury report showed that by August 2015, 34% of Tegeta’s coal stockpiles were rejected by Eskom for not meeting its specifications.

The Guptas may have pulled a fast one on Eskom over the Brakfontein coal contract, but the evidence suggests Koko got one over the Guptas at Optimum, which is currently in the process of being sold. Even allowing for the fact that different managers will point the finger of blame elsewhere, a long-standing practice at Eskom, Koko has some right to feel aggrieved over his treatment as head of the utility. It’s small consolation, but the labour court found little good to say about the way Eskom treated Koko. Judge Moshoana found that Eskom and new CEO Hadebe had acted unlawfully in demanding Koko resign or be fired in January 2018.

Koko now works as an energy consultant with 1 200MW of projects currently under development. None of these projects is based in SA.

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Flouting good practice by huge irregular expenditure with extremely bad characters he knew from his tenure as head of generation during 2015 (when Brakfontein was signed without tender process) for coal from Optimum despite an unpaid fine of R2 bil.; unilaterally railroading a green initiative that was the result of years of planning; leaving behind a supply crisis from overlapping maintenance schedules elevating diesel usage to R140 mil. during March 2018; means he should shut his trap.

Koko has always been corrupt!! Still trying to defend his actions. Will never forget the Carre Blanche interview, lying on camera about Optimum’s contract. Then they showed him the hard core evidence.. Seems like somebody at Eskom is still slipping mail to Koko.. Rat in the midst, supplying confidential info to him.

He has always struck me as a showman and in typical fashion he is trying to woo his misinformed followers with this graph. He never mentioned that under the same tenure, maintenance schedules were neglected. is there a graph which shows maintenance. Also the quality of the coal procured were bad under their tenure. This had the effect that the people after him shows bad results. The people he is trying to impress obviously thinks one step at a time and not 2. Let me explain to his followers: You buy a car and you are a fast driver. You record great speeds around the track – but you do not service the car. Then you sell it. The next driver now inherits a badly performing car and has to focus on maintenance to fix it.

Like Zuma, Matshela Koko cannot stand to be out of the limelight. He now wants to fix his image. Please stay out of our faces now dude – we are fed up with corrupt and dishonest people – this country deserves better.

This “journalist”is so thick it is frightening. What about the carte blanche interview? The multi-million contracts that eskom gave to his daughter ? I can only conclude that Koko is paying this guy off. Oh and Round 4 tariffs were not 215c per (kWh) they were 60c. Zero credibility.

Rent a crowd Vodacom headache)/ rent a journalist. Nothing can surprise in SA in today’s world.

How exactly is “operational performance” defined ?
Without that information, the graph is meaningless. As with all statistics, one can tailor the measurement to support whatever point one is trying to make.

As regards the apparently masterful Optimum/Tegeta deal that is attributed to Koko in this article, two qustions:

1) If this deal was truly the coup that Koko (and the writer) make it out to be, every last detail of this masterpiece of negotiation would have been foremost in Koko’s mind. Why then, when he was interviewed by Carte Blanche, did he not only “forget” the most important details, but look like a schoolkid who had just been bust for cribbing ?

2) The (unsustainable) steal price of R160/ton in exchange for a paltry R658-million “prepayment” looks impressive in an article, but what *actual* benefit has Eskom derived from this deal ?

Spot on, the prepayment looks like a master stroke until you actually use your head. You are making a R700m prepayment that is going into funding the deal. You know the coal price is unsustainable and therefore this is a terrible credit risk on that prepayment. I suspect they stopped delivering the contracted coal a long time ago.

9 Easy ways to bankrupt SOE’s snd retire Rich: (A best seller by thick as thieves)

Get rid of expertise and intelligence

Employ uneducated personel

Get rid of non corruptable staff and whistleblowers

Slam home White monopoly capital as the evil behind the system

Apply the highest level of BEE immediately

Tell the masses Parastatal’s were in a mess in the first place due to segregation

Steal as much as you can till caught knowing full well Inquiries lead to nothing

RETIRE a millionaire

Is this supposed to be a joke article?

Did you forget about Koko’s daughters involvment the Trillian contract. There was also the sham disciplinary hearing which was clearly set up. Koko is dirty as heck,

“The cost of renewable energy to Eskom is R10 billion and by 2021 the total cost will be R100 billion, which it cannot afford.”

This is a common blatant lie which Koko continues to regenerate online. There is zero cost to Eskom for any IPPs, renewable or otherwise. They get fully compensated through tariff increases for IPPs from the get going, it is literally zero cost on Eskom’s books. Also, if you look at the increases, a very high % of increases are for Eskom.

Koko was also part of the same management group that allowed Eskom’s costs to get out of contract, he did not appear as CEO there, he has been with the organization for a long time. Why does Eskom have triple the staff they need?

Wow – this is pretty much a press release by Matshela Koko with his incorrect and warped stats (incidentally round 4a wind was 62c and solar 79c). It’s shocking he is not prosecuted (along with many other of his crony’s).
This is not a balanced article and shows complete amnesia of all the accusations agains Koko et al which is certainly not a witch hunt/trial.

As a regular reader of Moneyweb, and someone happy to have my views on an issue questioned, this article makes me wonder about what other moneyweb articles are as poorly researched

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