Business 7.7.2017 07:54 am

Eskom board called Singh to account over Gupta links

Eskoms interim Board Chairperson, Zethembe Khoza during a media briefing held at Megawatt Park, Eskoms head office in Sunninghill, 23 June 2017.Picture: Neil McCartney

Eskoms interim Board Chairperson, Zethembe Khoza during a media briefing held at Megawatt Park, Eskoms head office in Sunninghill, 23 June 2017.Picture: Neil McCartney

Investors concerned about governance.

Eskom interim chairman Zethembe Khoza on Thursday told journalists that the interim board called CFO Anoj Singh to explain following allegations that he was involved in awarding contracts to entities linked to the infamous Gupta family.

The allegations span his tenure at Eskom and previous at Transnet. Singh served as CFO at Transnet along with Brian Molefe who was CEO. After Molefe was seconded to Eskom in April 2015, he brought Singh with him in July of that year. Molefe has since controversially departed from Eskom.

Following the leak of thousands of emails about the business dealings of the Gupta family, allegations have been made that since 2014 Singh has travelled to Dubai on several occasions at the cost of the Guptas’ Sahara Computers.

A recent damning report by advocate Geoff Budlender further linked Singh to the payment of R250 million to Trillian, a company 60%-owned by Gupta associate Salim Essa. The payments were allegedly made without any contract being in place and there is doubt whether Eskom got value for the payment.

Khoza said at the signing of a $1.5 billion loan agreement between Eskom and the China Development Bank (CDB) on Thursday that the interim Eskom board has called Singh to respond to the allegations regarding Trillian. The board also interacted with the Transnet board about allegations of Singh’s wrongdoing during his tenure there.

Eskom signs R19.6bn loan agreement with China. Image: Moneyweb

Khoza said Singh “took us into his confidence” but would not disclose any detail. He said Eskom would issue a statement once the enquiry had been finalised.

Singh admitted that investors were concerned about governance issues at Eskom. He said Futuregrowth was the only investor that had suspended investment in state-owned companies due to governance issues. Eskom has had four or five engagements with Futuregrowth. The fund manager “is on a journey to lift its suspensions” and has recently lifted its suspension of investment in Sanral, Singh said.

He said local and international banks do robust due diligence and Eskom just last week completed such a due diligence with three international banks. He said the requirements were stringent and engagements robust. Findings are further independently reviewed. Singh said Eskom has been able to address the concerns of banks, bond markets and other investors.

Eskom has not seen a direct correlation between concern with governance and the cost of debt, Singh said. The cost is actually a product of the credit rating, and Eskom is working on the improvement of its stand-alone sub-investment grade rating, he said.

The $1.5 billion loan signed on Thursday is the second tranche of a $5 billion facility Eskom is working on with the CDB. Last year a R500 million facility was signed for working capital, while this new loan was for the completion of Medupi.

The loan has a five-year drawdown period and is repayable over 15 years, in semi-annual installments. Singh said the interest rate is competitive when benchmarked in the bond market and with other facilities under negotiation.

Singh said Eskom currently has R350 billion debt of which R254 billion represents utilised or committed government guarantees. Debt is expected to peak at R500 billion in the next five years, probably in year four.

Eskom “has an internal ambition” to release R100 billion of its R350 billion government guarantee, although the sovereign downgrade and lower than expected tariff increases might make that difficult, he said.

Eskom officials have just returned from meetings with investors abroad and have reported that there is significant appetite from international investors for Eskom paper. “We might take advantage of that in the next quarter,” Singh said. Eskom plans to access the debt market at least once a year.

Medupi units five and six are already in commercial operation and unit four has been synchronised to the grid, Eskom stated. Kusile unit one has also been synchronised. The projects are progressing in accordance to the revised construction schedule and within the revised budgets of R145 billion for Medupi and R161 billion for Kusile.

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