Deutsche Bank distances itself from Eskom 'support' statement

Cape Town – Deutsche Bank has distanced itself from Eskom’s claim that it had "support and backing" from the lender, following the release of the public protector's "State of Capture" report.

In a statement, the power utility said: "Eskom welcomes the support and backing it is receiving from international lenders like the Deutsche Bank, as well as professional bodies such as the Progressive Professionals Forum, who have come out in support of the stance taken by Eskom on its dealings with suppliers, as well as the role it plays in the transformation of the coal industry."

Deutsche Bank expressed its confidence in Eskom’s management and the way it handled the Tegeta coal contracts issue, the Eskom statement read.

It quoted the bank as saying: "We believe Eskom's management has presented a strong case and the underlying transactions were seemingly in compliance with all internal and external requirements and were carried out keeping in mind the best interest of the company, investors and shareholders."

However, Deutsche Bank appeared to have distanced itself from the Eskom statement.

'Decline to comment'

In response to follow up-questions, Deutsche Bank replied that the statement was an independent analysis from Deutsche Bank's fixed income research team and was issued following a conference call with Eskom.

"However it should be noted the research is independent. It does not, therefore, reflect the opinion of Deutsche Bank or its management. We therefore decline to comment," the bank said.

The Progressive Professionals Forum issued a statement of support for Eskom and said it was in good hands with CEO Brian Molefe in charge. Besides financial improvement, there had been no load shedding on Molefe's watch, it said.

The forum’s secretary general Siphile Buthelezi said they had full confidence in the Eskom board.

Eskom’s board and Molefe came under the spotlight in the report over a coal deal in which Tegeta Exploration and Resources, a company owned by the wealthy Gupta family, had substantial shares.

READ: Eskom: We did not favour Tegeta

According to information former public protector Thuli Madonsela’s investigators obtained, Molefe's cellphone location placed him near the Gupta’s Saxonwold home. Between August 2015 and March 2016, a total of 58 calls were apparently made between Molefe and Ajay Gupta, the eldest of the three Gupta brothers.

According to Madonsela’s report, which was released on Wednesday, Eskom was implicated in a prepayment of almost R1bn to Tegeta, for a coal tender to supply the Arnot power station. Tegeta allegedly used the money to buy the Optimum Coal Mine (OCM) from Glencore. The transaction could be corrupt, illegal, and amount to fruitless and wasteful expenditure.

Severely prejudiced

Madonsela said Glencore appeared to have been severely prejudiced by Eskom's refusal to sign a new agreement for the supply of coal to the Hendrina power station in Mpumalanga. The two parties first entered into an agreement in 1993.

"It appears that the conduct of Eskom was solely for the purposes of forcing OCM/OCH (Optimum Coal Holdings) into business rescue and financial distress," she said.

READ: Madonsela nails Eskom over Gupta coal tender

"It appears that the conduct of Eskom was solely to the benefit of Tegeta in that they forced the sale of OCH to Tegeta by stating that OCM could be sold alone.

"Thereafter, it appears, they have allowed Tegeta to proceed with the sale of a portion of OCH in the form of the Optimum Coal Terminal.

"This could constitute a breach of the Public Finance Management Act in that they acted solely for the benefit of one company," she said.

President Jacob Zuma's son Duduzane is a business partner of the Guptas and holds shares in Tegeta.