CEO: Glencore held 'a gun to our head'
The CEO of South Africa's main power supplier, Eskom, told a group of reporters that Glencore - the massive international commodities trader - threatened to cripple the country's power supply over the summer, Bloomberg reports.
Glencore wanted Eskom to renegotiate its coal contract in July and pay a higher rate - 530 rand per metric ton instead of 150 rands per metric ton.
When the CEO, Brian Molefe, refused, Glencore mentioned that stopping the supply of coal to one of South Africa's power plants would lead to more electricity outages.
From Bloomberg:
"They had something that they thought could get us to pay an exorbitant amount for their coal. Basically, from where I was sitting rightly or wrongly I felt like they were holding a gun" to my head, he [Molefe] said. "But we were able to procure coal at less than the price they were asking" and the power plant didn't shut down.
Glencore was preparing itself for "balance sheet armageddon" in September as commodities prices collapsed. Cashflow and debt became huge issues. It announced a plan to reduce a serious portion of that debt back in December.
Bloomberg's commodities index is down over 26% for the year. This statement from Eskom's CEO gives us a glimpse of how ugly it can when a commodities company is faced with the reality of plummeting prices.
It's a situation that, as a commodities producer, South Africa shares.
For more on this head to Bloomberg>>