Huarong Energy Africa provides $1.5 billion loan to Eskom for power plant upgrades

Huarong Energy Africa provides $1.5 billion loan to Eskom for power plant upgrades On or around October 27, 2017, Huarong Energy Africa (HEA), a subsidiary of the state-owned China Huarong Asset Management Co.

Ltd., signed a $1.5 billion (R25 billion) loan agreement with the Electricity Supply Commission (ESKOM), South Africa's state-owned electric power company.

The purpose of the loan was to help upgrade South Africa's power infrastructure (华融能源与南非国家电力公司签订结构性融资方案 ).

The loan agreement was signed by Eskom's then-acting Chief Executive Officer Sean Maritz and Huarong Energy Africa Chairman Jianbao Chen.

This loan later became a source of major controversy when it was revealed that Eskom gave the South African Reserve Bank incomplete and inaccurate information about the loan in order to ensure that it would be granted permission to sign the loan agreement.

A corruption scandal involving this deal was also revealed in 2018: a $32 million program development fee was required by HEA, with 60% of it to be paid within 3 business days after the signature date.

The program development fee needed to be paid to an offshore shell company (“Ideva International”) — registered in the Virgin Islands — with no trading record or proof of revenue.

Eskom's then-acting Chief Executive Officer Sean Maritz allegedly ignored all legal advice and signed off on the program development fee payment. Maritz was then suspended from his post in January 2018 and he resigned a month later. The matter is currently the subject of a Special Investigating Unit probe.

According to an article published by The Citizen on February 22, 2019, Eskom chairperson Jabu Mabuza announced that Eskom would not pay back the loan it received from Huarong Energy Africa. The former chief executive and chairperson of China Huarong Asset Management Co. Ltd., Lai Xiaomin, has also been indicted and is awaiting trial for corruption and other offenses.