Brown hands Eskom ultimatum over Huarong loan agreement

Johannesburg - Public Enterprises Minister Lynne Brown gave the Eskom board an ultimatum to hand her a report on a controversial loan agreement by close of business on Friday.

Should any impropriety appear to have been committed, she will take immediate and decisive action, her spokesperson Colin Cruywagen told Fin24.

There has been no indication yet if Eskom complied with her demand.

The agreement came under fire on Friday when  Business Day reported that suspended Eskom chief financial officer Anoj Singh signed a secret deal, which obligated Eskom to pay a R400m "signature fee" to an obscure offshore entity for raising a $2bn or R25bn loan from China's Huarong Energy Africa to build or refurbish power stations.

Brown said she conditionally supported a strategic cooperation agreement with the Huarong Asset Management, signed last year.

The Eskom board had written to the minister at the time about the strategic cooperation agreement with the Huarong Asset Management in September 2017, Cruywagen said, and she had given the agreement her blessing on condition certain documents were provided. The documents, however, never materialised. 

"Minister Brown supported the Eskom board’s written request to sign a strategic cooperation agreement with Huarong Asset Management," Cruywagen said. "The agreement was high level and non-binding, with no financial terms."

He explained that the minister's support was conditional on her being provided with the proposed Asset Development Framework Agreement and term sheet, which she was still waiting for. 

Eskom was mum on Friday on reports that a fee of R400m was channelled to an unknown account in Hong Kong when the state utility secured a loan from China last year. 

The state utility denied that any payment was made. In reply to Fin24’s questions about the fee Singh allegedly signed off and the conditions of the Huarong loan, Eskom give a one-line reply, stating "Eskom has not made any payment to the company". Huarong invoiced Eskom for the fee in October.

Eskom is severely cash-strapped and is trying to raise money to ease its liquidity woes. The R400m has ignited new concerns about cash flowing out of the utility without the necessary checks and balances being applied. 

The Business Day report suggested that the dubious agreement was in return for Huarong granting R25bn to Eskom to build or refurbish power stations. The paper also reported that the terms of the loan agreement allowed Huarong to select and approve contractors.

Apparently officials in Eskom's legal and finance divisions as well as Treasury suspected that the fee might be a disguised kickback, and that Singh went against legal counsel from officials who warned that the terms of the 2017 transaction were onerous and ambiguous "at best".

Huarong told the paper that it would issue a joint statement with Eskom to address the allegations. 

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