R5 billion Koeberg chaos

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An epic battle in the Constitutional Court between Eskom and French firm Areva, in the one corner, and Toshiba subsidiary Westinghouse, in the other, is casting doubt on the future of South Africa’s only nuclear plant, Koeberg.

Westinghouse is challenging a R5 billion contract that Eskom awarded to Areva for the provision of six new steam generators at the 1 800 megawatt Koeberg plant to extend its life.

The case, believed to involve the biggest tender that has been disputed in a South African court, has already exposed the intrinsic workings of Eskom’s tender committee board in awarding the contract to Areva, questioning whether the tender process was legitimate.

After Eskom took four years to make a decision, its board awarded the multibillion-rand Koeberg refurbishment contract to Areva in August 2014, sparking a legal clash with Westinghouse.

In December, the Supreme Court of Appeal gave Eskom a severe dressing-down.

With a full Bench behind her, Judge Carole Lewis set aside the tender award, calling “the whole process irrational and unlawful”.

However, the court stopped short of handing the tender back to Westinghouse, sending it back to Eskom “for reconsideration”.

Eskom and Areva have now appealed to the Constitutional Court.

Both argued that even if the tender was filled with irregularities, Areva should still continue with it in the interest of South Africa’s energy supply.

A critical deadline of 2018 stands central in the latest wrangle.

Eskom, in an affidavit by group executive for generation Matshela Koko, suggests that it is now a matter of nuclear safety that the existing steam generators be replaced in 2018, as they are “fast approaching the end of their lifespan”.

The plan was to fit the new steam generators during a planned shutdown of Koeberg in 2018, referred to as the “X23” outage.

Eskom argued that it forged ahead with the contract, despite Westinghouse’s legal challenge, because of the urgency of the 2018 deadline.

Areva, in turn, said in its papers that it had already started work on the project and would be able to deliver on it significantly faster.

The French firm described Koeberg as an ageing nuclear plant that needed the necessary revamp so as not to endanger South Africa’s electricity supply.

Westinghouse maintains that this view was “alarmist”, adding that Areva and Eskom never mentioned this critical deadline in former court proceedings.

“Eskom and Areva opportunistically suggest that X23 is an immutable deadline for the replacement of the steam generators,” it said this week.

“This is both new and untrue.”

Citing an Eskom study, Westinghouse argued that X23 was not “an immutable deadline”.

The company also argued that, despite the work that had begun, “Areva has considerably delayed the implementation of the tender and will not … meet X23”.

Westinghouse believed the replacement steam generators could be safely installed during future shutdowns at Koeberg.

At the last minute, Westinghouse lost the Koeberg tender to Areva.

On each previous occasion, Eskom’s technical and executive teams had recommended Westinghouse, only to be overruled at either board or ministerial level.

Court documents show that both companies had neck-and-neck technical offerings, with Westinghouse coming in cheaper and offering more in terms of localisation.

Eskom argued that Areva had squeezed out Westinghouse at a so-called penalty shoot-out a month before the tender winner was announced.

It was here that the additional “strategic considerations”, which Eskom says gave Areva the edge, surfaced.

Despite the shoot-out, Eskom’s technical experts ultimately handed a recommendation to the parastatal’s board tender committee to award the tender to Westinghouse, but in a secret ballot the board reversed the decision.

Eskom then explained the decision in a letter to Public Enterprises Minister Lynne Brown, outlining five “strategic criteria” that the committee had considered when it made its decision.

Eskom also later admitted in the South Gauteng High Court that a three-month “float” in Areva’s project plan to replace the steam generator was indicated as a deciding factor.

Koko conceded in the high court that the strategic considerations were not part of the tender evaluation criteria.

However, the appeal court found that each criterion was introduced after the tender criteria had already been set and were, therefore, inserted unlawfully into the process.

Eskom is optimistic that the Constitutional Court will view the considerations in a different light.

Eskom insiders have told City Press that if the tender was to be reissued, it could take from six months up to a year before it could be awarded again.

Westinghouse hopes that the Constitutional Court will go one step further than the supreme court did, and award it the contract outright.

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