Eskom ‘flouted’ rules in R28bn Huarong loan deal

Eskom flouted its own processes when it accepted a dodgy $2bn (R28.4bn) loan agreement from Chinese-based company Huarong Energy Africa.

This is according to Eskom’s corporate funding specialist Sincedile Shweni‚ who was speaking at the state capture inquiry on Monday.

Shweni‚ who has been employed at Eskom in various capacities since 2001‚ said Huarong’s proposal for the loan agreement was not sent to the utility’s asset and liability committee (Alco) for approval.

Shweni told commission chair deputy chief justice Raymond Zondo that Huarong’s proposal was initially well received.

In 2016‚ the cash-strapped utility received a formal unsolicited proposal from Huarong for a “financing solution” to build or refurbish its power stations.

The contract outlined a $2bn loan Eskom would receive; but it had caveats. There was a commitment fee of about R400m and an even larger penalty if Eskom backed out.

Shweni described the normal processes that should be followed when an unsolicited proposal was received.

“Whoever comes with an unsolicited proposal meets one of the Treasury representatives. The next step is to do some vetting or verification of the entity‚ especially if the entity is fairly new‚ like Huarong. The party will then give us a term sheet which we will evaluate‚” he said.

Former Eskom CEO Anoj Singh allegedly ignored legal advice by an independent law firm and other officials at Eskom who said the terms of the loan were ambiguous and signed off on the deal.