Perhaps the most dramatic episode in the Gupta state capture saga was a late-night Eskom board meeting at which a controversial R660m "prepayment" was authorised that gave the cash-strapped family the funds to buy Optimum Coal, hours before the deal expired.

That Eskom meeting, held at 9pm on April 11 2016, was vital for the Guptas, if they were to realise their ambitions to become major players in the coal game.

Now, e-mails seen by the Financial Mail show that Matshela Koko — who was tipped to take the top job at Eskom before he was suspended last month amid a slew of nepotism allegations — was warned that the prepayment would not be economically viable for Eskom, but went ahead with it anyway.

Eskom board member raised flags around price and wisdom of prepayment; board went ahead anyway

Eskom company secretary Suzanne Daniels surprised the board’s tender committee less than 45 minutes before the meeting, informing the board that it would be asked to green-light the Gupta prepayment.

"The transaction requires urgent [board tender committee] consideration and approval for immediate implementation," Daniels wrote in an e-mail.

She said the matter was urgent because two coal supply contracts for Arnot power station were about to expire. Eskom needed to ensure security of supply for the high-demand winter months, so both contracts had to be extended without going out to tender.

One contract was with Gupta-owned Tegeta Exploration & Resources, which had been supplying coal to Arnot from Optimum colliery through an offtake deal since January. At the time, Optimum was in business rescue. (Fortuitously, Tegeta was the company buying Optimum Coal from Glencore.)

Attached to Daniels’ e-mail was a four-page submission signed by Koko that asked the committee to approve five months’ upfront payment to the Gupta company "to meet the production requirements". Tegeta would be paid R19.69/gigajoule (GJ) — almost double the average price of R11.05/GJ that Eskom pays for coal. The total bill came to R660m including Vat.

Critically, the Financial Mail has established that at least one board member, Viroshini Naidoo, found Daniels’ last-minute e-mail disturbing. Half an hour later she fired off a response to Daniels, copying in Eskom’s seven-member committee, including Koko.

Naidoo questioned the price offered and the wisdom of prepaying a company in business rescue. "Is Tegeta the new company that bought Optimum? Was Optimum supplying us before and at a better rate? Are they not in business rescue? By prepaying them, who gets the money?" she asked. "Is it the business rescue practitioner? Can we lose money by it going to the administrator? Can we justify the price we are paying for this coal to the public and [the department of public enterprises]?"

The prepayment was for operating capital to mine coal to be delivered to Eskom, not to buy the company. I was duped into rubber-stamping this
Viroshini Naidoo

Naidoo received a curt reply, saying the issues would be dealt with during the meeting. The board meeting took place telephonically, and minutes reflect that Naidoo’s questions took up a large part of the discussions. She was assured by Eskom head of procurement Edwin Mabelane that the price was fair given the quality of coal, that Tegeta had offered a 3.5% discount from R20.41/GJ being charged, and that it would pledge its shares to Eskom as security.

During the meeting, Naidoo sent another e-mail to Daniels (copied to the committee, including Koko) that read: "Why is the shortage discovered so late, why are these two companies chosen over others?" she asked.

Nobody gave her an answer.

In the end, the committee approved the Gupta prepayment, even though the question of the risk of paying a company in business rescue upfront remained unanswered. Despite Naidoo’s strong misgivings, Koko signed the deal with the Guptas two days later.

These new revelations that Naidoo had resisted this payment show clearly that even people on Eskom’s own board had deep reservations about the "prepayment".

This would become important when, six months later, public protector Thuli Madonsela revealed in her report on state capture that the Eskom prepayment was not used to fund "production requirements", as Koko had claimed, but to provide the Guptas with the outstanding cash they urgently needed to close the deal.

The money came in the nick of time. Six hours earlier, the banks had told the Guptas they wouldn’t be able to give them the R600m needed to meet the Optimum price tag of R2.15bn, due two days later. Without the prepayment, the deal would have fallen through.

A draft treasury report, sent to Koko in April this year, confirms as much. It says: "The advance payment of R659,558,079 should be regarded as a loan because there is no evidence that [Optimum or Tegeta] used the funds to procure any equipment" to increase output, adding it should be repaid with interest.

Treasury says any notion that the Guptas would be paid at a discounted rate for the coal was a sham too. Eskom had paid "R19.69/GJ for the coal that should have cost it R18.68/GJ", it said.

E-mails leaked to the Financial Mail and other publications in recent weeks, along with Madonsela’s report, also show that Koko, former Eskom CEO Brian Molefe and mineral resources minister Mosebenzi Zwane gave the Guptas a helping hand at crucial milestones to clinch the deal.

Matshela Koko. Picture: FREDDY MAVUNDA
Matshela Koko. Picture: FREDDY MAVUNDA

When Optimum was owned by Glencore, it was losing R100m/month because its contract obliged it to sell coal to Eskom at less than it cost to mine it, and Molefe refused to raise the amount Eskom was paying.

In July 2015, the Guptas offered Glencore R2bn for Optimum. Two weeks later, Molefe slapped a R2.2bn penalty on Optimum for delivering "substandard coal". Last month former mineral resources minister Ngoako Ramatlhodi accused Ben Ngubane, who resigned as Eskom chairman this week, of trying to strongarm him into suspending all Glencore’s mining licences in SA until the penalty was paid. (The penalty was subsequently "settled" in a private arbitration after the Guptas took control of Optimum — but, tellingly, Eskom won’t say for how much.)

Molefe has denied Madonsela’s claim that he pushed Optimum into business rescue to favour the Guptas. But the leaked e-mails suggest Koko was sending the Guptas confidential information about the Optimum deal, including a legal opinion.

On December 9, Tegeta CEO Ravindra Nath sent Koko a letter (copied to Rajesh "Tony" Gupta) thanking him for holding a meeting to discuss a R1.68bn prepayment for coal that would be supplied from Optimum mine — even though the company hadn’t even bought the mine yet. Nath asked for written confirmation that the prepayment would be forthcoming, providing his attorney’s bank details.

The next day, December 10, Tegeta signed the deal to buy Optimum from Glencore.

Koko’s cosy relationship with the Guptas continued. The leaked e-mails show that on January 4 2016, the Guptas treated him to a stay at the Oberoi hotel in Dubai, complete with chauffeur-driven luxury car hire.

Within weeks, Eskom had awarded Tegeta a lucrative contract to supply coal from the Optimum mine to the Arnot power station — the same contract that was extended with a R660m prepayment three months later.

Asked for comment this week, Koko declined. "The prepayment is being investigated by national treasury and the SIU [Special Investigating Unit]," he said. "I would not like to open another line of investigation by the media. I would let the current investigative processes unfold and I will co-operate with them."

Speaking to the Financial Mail this week, Naidoo said she would never have approved the prepayment, had she known the money was being paid to the Guptas to fund their acquisition of Optimum.

"The prepayment was for operating capital to mine coal to be delivered to Eskom, not to buy the company," she says. "I was duped into rubber-stamping this."

Naidoo feels aggrieved that she’s been tarred and feathered as a Gupta deployee in Madonsela’s report. "I am not a ‘Gupta link’ or a pal of the family. I’ve always applied my mind as a director solely for the benefit of Eskom," she says.

Naidoo says she was only told by Eskom the night before Madonsela’s report was finalised that she had been implicated. By then Eskom had spent almost a week compiling its response to Madonsela without consulting her.

In her report, Madonsela says Albatime, a company belonging to Naidoo’s husband, Kuben Moodley, had helped fund the Guptas’ purchase of Optimum — a charge Moodley denies. Madonsela says Naidoo was conflicted because she had worked for Albatime while serving on the Eskom board, and attended critical board meetings that had benefited the Guptas. Moodley had also served as Zwane’s adviser from October 2015 to the end of March 2016, which coincides with the time of the Optimum sale negotiations.

"Ms Naidoo did not declare her spouse’s involvement in the purchase of all shares in Optimum. This represents a serious conflict," Madonsela’s report says.

But Naidoo says Madonsela got it wrong, because Albatime hadn’t contributed a cent towards the Optimum sale. She says she had declared to Eskom that she worked for Albatime and that her husband was Zwane’s adviser, which is why she recused herself from several board meetings. And Moodley no longer worked for Zwane when the prepayment meeting took place.

"If Madonsela had contacted me I would have explained all this and given her all the documents to prove it," she says. "This entire situation has destroyed my reputation both professionally and personally."

Eskom spokesman Khulani Qoma says the power utility believes Madonsela was "procedurally unfair" in expecting the entire board, including former directors, to respond in five days. But he adds that Naidoo had not submitted a full declaration of interest, as she was required to.

"Eskom only discovered the nature and extent of Ms Naidoo’s failure to provide a full disclosure ... when the public protector’s report was released," says Qoma. He says it is "not becoming of an ex-board member" to raise concerns now about a prepayment she had approved.

"One of the critical skills of being a board member is the ability to discern deception and/or falsehoods — her allegations are ominously suggestive of her, to say the least," says Qoma.

He says Eskom is waiting for the outcome of President Jacob Zuma’s review application of Madonsela’s report to deal with all the issues related to the prepayment and Tegeta.

But the fact remains that, until now, there has been no evidence that any of Eskom’s directors had taken issue with the payment to the Guptas. These new revelations will put further pressure on Eskom’s top brass to explain themselves.

The Gupta family’s attorney, Gert van der Merwe, says a decision has been taken not to comment on the leaked e-mails until a formal inquiry has been instituted.

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