ZESCO Ltd is seeking a Euro 1.78 billion loan from suspicious unlicensed and unregulated lenders based in Bosnia, Italy and Thailand, according to a News Diggers’ investigation.

And ZESCO has failed to explain the purpose of the loan it is seeking, saying management needs more time to come up with a response to a News Diggers press query that was sent on November 20.

Correspondence seen by News Diggers shows that Zesco is in talks with a firm called “Reming Company” based in Bosnia-Herzegovina, “Teledata S.R.r” based in Italy, and “NN World Business Company Limited” from Thailand, seeking a loan amounting to one billion seven hundred and eighty million Euro (which is approximately K45.5 billion).

The correspondence also shows that Zesco is in discussion to obtain a facility from the said firms, with a 12 year tenor, including a two year moratorium at a cost of 1.5 per cent per annum.

The proposed agreement also indicates that the Bank of Zambia (rather than of the Ministry of Finance) would be expected to issue a Euro 3.5 billion (about K90 billion) Sovereign Guarantee, which would run for a maximum of four years.

Sources close to the transaction at Zesco say they are worried about the push to get the said loan as the companies which the power utility was in talks with were not involved in such financial lending services.

“Everything is smelling fishy in this loan transaction. Firstly, this is a huge amount of money that surely deserves an explanation, especially given our debt position as a country. Secondly, the interest is too high and I wonder if they called for bids from interested lenders before arriving at these lenders. It would also be interesting to know how they were selected,” wondered the sources.

“Some of the jurisdictions that Zesco proposes to borrow from are high risk. The current level of borrowing by zesco is also quite unsustainable and I wonder what plan is there for repayment. Can the Zesco balance sheet absolve that level of borrowing? Did the board and govt approve it? Those are the questions. With the current debt default, and credit rating in junk, the trend of borrowing or attempting to borrow from unsound sources may worsen the situation for the country.

Sources said the companies Zesco was in talks with, were not licenced lending institutions.

“We have another NAPSA situation at ZESCO where management was pushed to get a bogus loan from scrupulous international lenders. These are companies which are not licenced or even regulated by any local or global authorities. In fact they are not even involved in the business of providing such facilities. We are not sure is these companies that we are in talks with have been vetted, because even you as a journalist you will see that these are suspicious companies which people are trying to use to defraud government,” sources said.

“I can tell you, for example, that Reming Company from Bosnia says it deals in architecture and engineering, when you heck, you find that it has no record of lending money to sovereign states. [It’s] the same with NN World Business Company from Thailand, this one trades in assets, goods and properties. If you check their profile, they also do not deal in financial services of this nature that Zesco is seeking. When you look at Teledata, this is a company that operates in the field of chemical and industrial plant engineering, as well as civil, industrial and military construction. This is information that anyone can access even from their websites. So one would wonder why Zesco would leave all the available financial institutions and commercial banks located in safe jurisdictions, and go to borrow money from Bosnia! What’s the motivation?”

On November 20, News Diggers wrote a query to Zesco seeking to find out: the purpose of the said loan; Zesco’s repayment plan, how Zesco picked the specific companies as potential lenders, if Zesco considered carrying out a vetting process for the above lenders

However, Zesco said management was still deliberating on the response to give.

Zesco senior manager corporate affairs Dr John Kunda gave the following responses on occasions when he was asked for a response to the query:

Date 25- 11-2020: “I have engaged internally to get a written feedback, that is what I am chasing up. Only that the boss FD (Finance Director) went to Livingstone for training. He started off yesterday so now I was asking if he can give me feedback. So I am just waiting in the next hour what the director will give me so that I don’t derail you, because your intention was to publish on the 24th.”

Date 25- 11-2020: “I’ll have an update when they are just done with the meeting we will meet so that we draft the statement. They are saying ‘no we can respond to this one, there are no issues’. I am hoping I can give by the end of today.”

Date 26- 11-2020: “The morning is very good, so my boss drafted and then he gave the finance director just to review, so he is attending the ITC meeting in Livingstone to review and he will share it with you. He says there is nothing to hide, so I will get a response from ba Mwila. I am hoping I can get it at Lunch time so that I can give it to you. They want to give to you in detail because your questions were a lot. I will give you, there is nothing to hide, we are not running away from it.”

Date 26- 11-2020: “He is saying that he did his initial draft for director finance so he is just waiting for director finance whom I have seen here because he is the one who has been making presentations, maybe that is why he has delayed to respond. So I will follow him up before the gala dinner just to ask him to clear please, so that he can give you something.”

Date 01-12-2020: “I am just doing the final touches. I will give you, that is not an issue where we have reached is the last stage. I will give you today. Just wait let me call my boss I will give you, I have just finished editing it he just needs to sign it off.”