PetroSA overcharged Eskom on a 50 million-litre emergency purchase

Cash-strapped Eskom had to cough up an additional rand extra per litre of diesel, despite purchasing the product in bulk (50 million litres) from PetroSA.

PetroSA is Eskom’s main diesel supplier and the financially distressed power utility has to pay upfront for the fuel.

Diesel budget ran dry in November

Eskom’s two open-cycle gas turbine (OCGT) power plants, Gourikwa and Ankerlig, run on diesel and serve as the country’s emergency backup generators that can mitigate up to two stages of load shedding, if running at full output of 2 067MW.

Back in November, Eskom told the government it had run out of money for diesel.

At that point, the mainly powerless parastatal had already spent double the R6 billion budget allocated for diesel with the financial year ending 31 March 2023.

This means that Eskom had no money to run the OCGT for the remaining four months of the financial year, and was unable to meet the country’s daily power needs.

Load shedding immediately intensified to 6 000MW, resulting in massive political pressure to keep the lights on.

PetroSA’s so-called ‘donation’

After Eskom’s admission, National Treasury and other government departments denounced the parastatal, accusing it of excessive spending and mismanagement.

According to a report by EE Publishers, Eskom capitulated and somehow managed to scrape together funds from savings in capital and operational expenditure for a first emergency procurement of diesel in late November 2022 from stock held by PetroSA.

At the time, however, the public was told that PetroSA had supplied the diesel as some form of “donation” in the wake of the deepening power supply crisis.

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But, it turns out there was an agreement to resolve the issue of payment later after further negotiations between itself, Eskom and the government departments involved.

However, unknown to the public, Eskom in fact paid R1.3 billion upfront for this first tranche of 50 million litres of diesel, which translates to an extortionate R26.00 per litre – about R1.00/l above the retail pump price.

Possible diesel price collusion

While PetroSA is Eskom’s largest diesel supplier, the power utility does buy smaller quantities from other companies including Engen, Astral and Shell.

Eskom’s reported normal prices for diesel:

• PetroSA: R23.51/l
• Engen: R20.36/l
• Astron: R20.28/l
• Shell: R20.22p/l

The power utility has since also reportedly received numerous unsolicited suggestions from the Department of Mineral Resources and Energy (DMRE), the Department of Public Enterprises (DPE) and members of its board to buy diesel from uncontracted sources.

It’s understood that Eskom leaders are resisting these suggestions, saying opportunistic suppliers were offering diesel prices slightly below PetroSA, indicating possible collusion and anti-competitive behaviour.

“If you cooperate and engage with irregular suppliers for ad hoc procurements as suggested by politicians and board members, this will just continue and increase,” sited one of the sources in the report.

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Response from PetroSA and DPE

PetroSA said the company operated as a commercial entity which aimed to be “profitable, convenient and efficient within the current market and industry dynamics”.

It also refused to divulge prices due to commercial agreements with Eskom.

Meanwhile, the DPE passed the buck onto Eskom, although, it also advised Eskom not to engage with the media on the subject of diesel because it would “embarrass the shareholder.”

The department however admitted to actively prospecting and engaging diesel suppliers to expand Eskom’s supplier pool.

Compiled by Narissa Subramoney