ABB South Africa R1.56bn payment to Eskom the largest recovery to date, says SIU

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Eskom CEO Andre de Ruyter.
Eskom CEO Andre de Ruyter.
Gallo Images/Business Day/Freddy Mavunda
  • Contractor at Eskom's Kusile power station, ABB South Africa, will pay the utility R1.56 billion as part of a settlement.
  • This comes after the Special Investigating Unit launched an investigation back in 2018 – and is the largest recovery to date.
  • Eskom CEO Andre De Ruyter says that an estimated R3 billion in irregular expenditure incurred at Kusile must still be recovered.

Contractor at Eskom's Kusile power station, ABB South Africa, will pay the utility R1.56 billion as part of a settlement.

Eskom officials and the Special Investigating Unit made the announcement at a briefing on Friday.

The amount relates to overpayments made by Eskom to the contractor in the construction of Kusile power station. Fin24 previously reported that ABB South Africa was among three other contractors – Stefanutti Stocks, Basil Read Joint Venture and Tubular Construction Projects – that benefitted from over R4 billion overpayments in the construction of the power station.

Kusile is part of the new build coal fired power station project at Eskom commissioned along with Medupi in 2007– it has suffered time delays, cost overruns running into the billions and design defects. Both Kusile and Medupi power stations were due to be completed in 2015. Eskom CEO Andre De Ruyter has said that the design defects are being addressed and Medupi could be fully on stream by the end of the first quarter in 2021.

At the briefing on Friday, Advocate Andy Mothibi of the SIU said the settlement was the largest recovered to date. It comes after a lengthy investigation – which arose after ABB South Africa voluntarily disclosed alleged collusion with certain Eskom officials to irregularly award it R2.2 billion for a control and instrumentation contract for Kusile in 2015. At the briefing De Ruyter explained that at ABB has for many years been providing Eskom with a variety of control systems throughout its generation, transmission and distribution systems. In this case, ABB was providing what could be considered "the brains" of the Kusile power station.

The settlement agreement will be subject to the review by a high court.

De Ruyter explained the amount is comprised of R800 million for irregular variation orders, R250 million is attributed to the irregular awarding of the contract via collusion with Eskom officials, R380 million is related to interest on the money irregularly paid and r160 million relates to profit accrued to ABB South Africa.

De Ruyter said it is estimated that a further R3 billion in irregular expenditure incurred at Kusile is yet to be recovered.

Complete work

De Ruyter said that construction at Kusile was 90% complete, and Eskom will approach National Treasury to allow ABB to complete the remainder of the work, at no profit. He said it would be costly to switch to a new contractor and it would delay Kusile coming on stream by another four years. Finding a new contractor also risked claims from other contractors as well as load shedding.

Two former executives of Eskom have also appeared in court and are being prosecuted in connection with irregularities in the ABB contract.

Criminal investigations are still ongoing and no arrests have been made yet – the SIU and Eskom were reluctant to provide names of officials being investigated.

Commenting on the developments, Public Enterprises Minister said there are tens of billions more to be recovered from irregular contracts with state-owned enterprises. He also said businesses involved in malfeasance must come forward, otherwise the SIU will inevitably find them.

So far in reviewing contracts, to recover losses from irregularities, Eskom has managed to recoup R1.1 billion from McKinsey and R171 million from Deloitte Consulting.

It is also pursuing a civil claim of R3.8 billion from several former officials, board members, and members of the Gupta family and a R95 million claim against PwC, it said in a separate statement issued on Friday.

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