The Duvha power station. Trillian acted on behalf of Eskom to settle a R5-billion insurance claim following an explosion that wiped out 600MW.
The controversial Gupta-linked firm Trillian quietly handled negotiations for Eskom to settle a massive insurance claim, a service that stood to land Trillian a slice of a R100-million fee.
The company also helped Eskom to find a supplier to replace the insured unit, complete with backing from the Chinese government, in what would be another deal worth several billions of rands.
Even in the face of clear evidence of Trillian’s involvement in both deals, Eskom has consistently denied the link – and Trillian says its “engagement” with Eskom does not allow it to speak about the work it has done.
Trillian is 60% owned by a close Gupta family associate, Salim Essa. The company was recently named by the public protector as one of several companies that allegedly paid towards the Gupta family’s purchase of a coal mine, which Trillian denies. It has also denied having links with the Gupta family, despite Essa’s controlling stake and the well-documented relationship between him and the Guptas.
Today the Mail & Guardian can reveal that Trillian Capital Partners and its associated company, Trillian Advisory, negotiated with Eskom’s insurers for months in an attempt to settle a R5-billion claim related to the March 2014 explosion at the Duvha power plant in Mpumalanga. The incident, caused by over-pressurisation of a boiler furnace, saw the entire 600MW unit being shut down.
Documents show that Trillian executives met representatives of the insurers, Marsh, in Sandton, that Trillian represented itself as Eskom’s agent in the matter, and that Eskom bosses knew of its work through a steering committee, which included Eskom executives.
But Eskom has repeatedly denied that it had a middle man involved in the insurance claim.
Trillian executives also worked to find a supplier to replace the Duvha boiler (a process scheduled to start next year), which Trillian had been appointed to do, according to a document seen by the M&G.
On December 4, Trillian had identified a Chinese firm for the job, with apparent financial backing from the Bank of China, according to an email. Such vendor financing would be particularly attractive to a cash-hungry Eskom, allowing a payment on the insurance claim to be redirected to other purposes rather than being used to pay immediately for the replacement unit.
Further evidence of Trillian’s links to the insurance deal includes a presentation prepared for Eskom’s chief financial officer Anoj Singh and Eskom’s head of generation, Matshele Koko in March this year. On a page titled “Completion of the Duvha” claim, it lists the names of the “Trillian/McKinsey team”.
Eskom’s comment had not arrived at the time of going to press but it will be posted here.
Last month, when the M&G asked Eskom about Trillian’s involvement in the claim negotiations, it said the company had “not provided assistance with negotiations for Eskom’s Duvha claim”.
The utility had earlier also provided a written response to a similar inquiry from the amaBhungane Centre for Investigative Journalism, saying the allegations were “baseless and factually incorrect”. “At no stage has Eskom sought or utilised the services of any company to act as a ‘middle man’ between Eskom and potential suppliers,” it said.
Trillian, in an emailed response to M&G questions, said: “Your questions relate to work conducted by Trillian for Eskom. In terms of the provisions of Trillian’s engagement with Eskom and in keeping with Trillian’s own observation of strict client confidentiality, the company is not in a position to comment on work done for its clients in the media or at all.”
Trillian’s involvement with Eskom seems to stem from big-budget proposals submitted to Eskom in December by the international consulting firm McKinsey & Company, which was then on the verge of concluding a partnership with Trillian Capital Partners. At the time, Eskom confirmed that McKinsey and Trillian were among a number of suppliers hired for other, urgent risk-mitigating work and its turnaround strategy.
It is puzzling why Trillian executives actively claimed to represent Eskom on the insurance talks for several months without a contract or why its team members had vendor badges for access to Megawatt Park.
Trillian’s links to Eskom appear to have been designed as an arms-length arrangement that emanated from a planned partnership with McKinsey.
It appears the partnership flopped after Trillian failed to pass a due diligence by the audit risk committee of McKinsey, an American firm. By then Trillion had done extensive pitches and work for Eskom based on the proposed master service agreement. Documents submitted to Eskom listed various revenue-generating deals and potential fees to be charged including:
- Negotiations for the Duvha insurance claim and replacement of the boiler; and
- An online vending system for Eskom’s prepaid electricity sales to raise upfront payment from bulk buyers.
Although the agreement was never signed, Trillian seemingly carried out the work.
Two well-placed executives said Eskom bosses lost interest in McKinsey as the negative due diligence meant there was no scope to get Trillian in on the lucrative deals.
Had it taken off, Trillian would have continued its work on, among other things, the sale of Eskom’s finance company that managed just over R8-billion in loans to staff as of September 2015. This is backed up by a letter from Singh to Eskom’s chief executive officer Brian Molefe, in which he seeks approval for a “closed tender” option for this sale.
On February 9 2016, Singh wrote: “McKinsey has been appointed to execute on a portfolio of initiatives and in turn has subcontracted Trillian Financial Advisory (Pty) Ltd to lead the financial advisory work streams.”
Singh was seconded to Eskom after serving for a long time as chief financial officer of Transnet, where, coincidentally, Trillian scored millions of rands for work it allegedly never performed. A court battle between Trillian’s chief executive officer, Eric Wood, and his former partners at Regiments Capital exposed how Transnet allegedly paid the company millions of rands for work done by Regiments.
Wood has yet to file responding papers to claims that he hatched a plan to divert deals initiated by Regiments to Trillian when he was preparing his departure from the company late last year.
The parties fell out after Regiments’ two other directors turned their noses up at an offer from the Gupta family to buy their firm, something Wood was apparently in favour of.
Trillian was mentioned many times in the public protector’s State of Capture report, which examined the influence of the Gupta family on the business of state-owned companies and their role in the hiring and firing of Cabinet ministers.
The report also contained details showing that Trillian executives allegedly had prior knowledge that finance minister Nhlanhla Nene was going to be fired last December and that he would be replaced with Des van Rooyen.
The minister, whose term lasted only four days, appointed two advisers, one of them Mohamed Bobat, coincidentally, a banker who seemingly worked on Trillian’s Eskom pitches until at least December 7 2015, two days before he landed his new job in government.
Regiments wants the high court in Johannesburg to declare Wood a delinquent director. Wood has repeatedly denied any wrongdoing and is defending the action. He has also brought a similar application against the directors of Regiments.