| Tue 14 Sep 2010, 16:20 | | OPT - Optimum Coal Holdings Limited - Optimum Coal - Eskom Arbitration Update |
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OPT - Optimum Coal Holdings Limited - Optimum Coal - Eskom Arbitration Update
Optimum Coal Holdings Limited
(Registration number: 2006/007799/06)
JSE share code: OPT
ISIN: ZAE000144663
("Optimum Coal")
OPTIMUM COAL - ESKOM ARBITRATION UPDATE
A Coal Supply Agreement ("CSA") was entered into between Eskom Holdings Limited
("Eskom") and BHP Billiton Energy Coal South Africa Limited ("BECSA"). With
effect from 1 July 2008, the rights and obligations of BECSA under the CSA, as
amended by the First Addendum to the CSA, were ceded and delegated to Optimum
Coal Mine Proprietary Limited ("Company"), a subsidiary of Optimum Coal Holdings
Limited. In terms of the CSA, the Company delivers 5.5 million tons of coal
annually to the Hendrina Power Station owned and operated by Eskom.
The Company has given notice to Eskom cancelling the CSA with Eskom with effect
from 1 May 2010. The basis on which the Company gave notice to cancel the CSA
is that Eskom is in breach thereof. The Company alleges, in addition to its
having been entitled to cancel the CSA, that Eskom is indebted to the Company in
an amount in excess of R22 million. The Company seeks to recover this amount
from Eskom.
Eskom has disputed the Company`s entitlement to cancel the CSA; and has denied
that it is in breach of the CSA and/or indebted to the Company in the amount
claimed or at all. Eskom alleges that it has deducted from amounts due and
payable to the Company a penalty which it alleges arises from the non-conformity
of coal supplied by the Company with a quality parameter in respect of
abrasiveness. The Company is of the view that there is no quality parameter in
respect of abrasiveness in the CSA as amended by the First Addendum.
The disputes between the Company and Eskom (i.e. whether the Company was
entitled to cancel the CSA with effect from 1 May 2010; and whether Eskom is
indebted to the Company in the amount of R22 million) are subject to arbitration
proceedings ("Arbitration") in terms whereof the Company is the Claimant, before
Mr John Myburgh SC ("Arbitrator"). The Arbitration was set down for hearing for
a period of 5 days to commence on 10 August 2010. The Company has started with
the presentation of its case, and the Arbitrator has heard evidence in support
of the Company`s case. By reason of factual and other complexities, the
Arbitration has been postponed to be heard for a further 10 days during March
and April 2011. The Arbitration award is expected to be handed down thereafter.
In the event that the Company were to be successful in the Arbitration, and were
to be found to have been entitled to have cancelled the CSA:
1. The CSA will have been cancelled with effect from 1 May 2010 (the date with
effect from which the Company gave written notice to Eskom in respect of
cancellation of the CSA);
2. The Company will stop supplying and delivering coal to Eskom for the
Hendrina Power Station; and
3. The Company will recover from Eskom an amount of R22 575 297 plus interest,
in respect of amounts unpaid by Eskom in terms of the CSA.
In the event that the Company were to be unsuccessful in the Arbitration, the
Company`s business will carry on without any change, and it will continue to
supply and deliver coal to Eskom in terms of the CSA, as it has done previously.
The Company would then also be obliged to pay penalties arising from the quality
parameter in respect of abrasiveness, which the Company at present denies as
being part of the CSA.
The Company and Eskom have agreed that, pending finalization of the Arbitration,
the Company will continue to deliver coal to Eskom in terms of the CSA, as if
that agreement had not been cancelled and as if it remains in full force and
effect in accordance with its terms; and Eskom has agreed on the same basis not
to deduct from the purchase price due to the Company any amounts in respect of
the failure of coal delivered by the Company to Eskom to comply to a quality
specification in respect of abrasiveness.
14 September 2010
Johannesburg
Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Financial Communications Advisers
COLLEGE HILL
Date: 14/09/2010 16:20:01 Produced by the JSE SENS Department.
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