Emails show Tegeta tailored Eskom letter for Brakfontein coal deal

Former GM of Fuel Sourcing, Johann Bester, wrapped up testimony at the State Capture Commission on Tuesday morning explaining that he had recorded a discussion with the company in a letter, dated 24 June 2015. He signed the edited version of the letter the next day.

It related to Tegeta’s offer to increase coal supply from its Brakfontein colliery to Eskom’s Majuba power station from 100,000 to 200,000 ton- per-month from October that year.

Bester included two key “protection” clauses for Eskom in the letter, including that all contract conditions remained and that the new offer would be subject to among other things, a duly signed modification to the original coal supply agreement between Eskom and Tegeta.

Eskom later regarded the edited letter as an “agreement” with Tegeta and used it in a 2016 application to National Treasury for approval for a 77% expansion of the original contract.

The State Capture Commission heard that new hard drive data shows an email message forwarded to Tegeta’s Ravi Nath from Bester’s then subordinate, Ayanda Nteta.

“Please find attached letter for your attention.”

This was Bester’s letter spelling out provisional contract terms.

The email trail shows that Nath then sent the letter to Tony Gupta on 24 June 2015 at 10.07am saying: “Dear Tony G. Please find enclosed the letter from Eskom (Bester’s) and a draft letter, as discussed.

Nath then provides a second version of the letter, this time containing the changes.

“I presume Nath wrote it, purporting as if it had been drafted by Eskom,” Bester said.

In another email recovered from the mystery hard drive, the Commission heard how around 10.20am on that same day, Nath wrote to Nteta: “Hello madam. Thank you for the letter.”

He then allegedly gave her the new version of the letter, this time without the protection clauses contained in Bester’s initial letter.

The changes, the Commission heard, now showed how Tegeta had used Bester’s information from his initial letter with material differences that ultimately benefited Tegeta to the detriment of Eskom.

Bester’s letter contained a requirement for a combustion test. That paragraph had now been changed merely to say coal must comply with relevant specifications contained in the current contract.

Tegeta had a smaller contract in place at the time and the the proposed extension of the contract required a combustion test, a condition precedent that had to be fulfilled and without which, there should have been no prospect of a revised contract.

Bester’s original letter contained another protection for Eskom, that it would not be obliged to take the extra coal but could, if it was needed.

Now, instead, the Tegeta version merely stated the increased tonnage at 200,000 tons per month without that condition.

Asked if it was customary for Eskom to receive draft letters from suppliers, Bester said no.

Had he been asked to do this, he told the Commission he would have told the supplier to get lost.

But, the revised letter, now without the protection clauses, was in fact signed by Bester the very next day.

He told the Commission he may not have been directly involved in the process at that stage, that he may have delegated it to someone in his team, in this case, Nteta.

At the time, he was tied up with negotiating the Optimum Coal deal while he was also involved in processes attached to the Eskom war room.

The Brakfontein coal deal was agitating him due to the pressure senior executives had applied to expedite its conclusion.

His then superior, Vusi Mboweni, said Bester, had twice told him he would replace him, including over delays in the signing of the Brakfontein deal.

He said he may have signed the edited letter provided by Tegeta without having been fully aware of the changes at the time.

But, now asked by the Commission’s advocate Kate Hofmeyr about the edited letter – drafted the very next day and signed by him – with the edits, Bester says he cannot remember what had informed the decision to sign it in that format.

He maintains this was not a contract, merely a letter spelling out Eskom’s position about the coal offer.

Bester, briefly, appeared emotional when questioned about why he had signed this version.

As part of a broader explanation, he told the Commission that he had been under strain at the time and that apart from wearing multiple hats, he also had concerns for his job.

He said he had worked with long-serving Eskom executives whom he could trust. When those like Kiren Maharaj (his former boss) and former acting CEO, Brian Dames, left, things had changed.

He said he knew he could not trust former executive, Matshela Koko, and that it was clear to him that his subordinate, Nteta, was being leaned on by the executive wing in the Brakfontein deal.

An investigation by Fundudzi Forensic Services had made adverse findings in respect of Bester’s handling of the Brakfontein coal supply contract, including that he had allowed Tegeta to dictate the terms of the coal supply agreement to the benefit of the Gupta-owned company, and at the expense of Eskom.

Said Bester: “I did everything in my power to put everything in place to prevent the contract and later, to add various protection provisions. I may have, with the constant pushing, it may appear that I went soft on them. It was not the intention.”

Tegeta ultimately secured a 10-year deal when a five-year deal with an option of another five would have been better for Eskom. And, the company was allowed to commence supply prior to the condition precedent, the mandatory combustion test, was met.

The Commission continues with testimony by Standard Bank’s former group legal counsel, Ian Sinton who is explaining the bank’s reasons for terminating a contract with global consulting firm, McKinsey & Co, following media reports about its ties to Gupta-linked entities including Regiments Capital. DM