Eskom, which resumed power cuts at the weekend, has estimated there is a further R3bn in irregular expenditure to recover at Kusile after it was announced that Swiss-Swedish multinational ABB had agreed to pay back R1.56bn in relation to an overpayment of a contract at the troubled power station.
CEO André de Ruyter said that once the money was recovered at Kusile, the parastatal would deal with contracts at its other mega coal-fired power station, Medupi.
“We don’t intend to take our foot off the accelerator,” he said.
Kusile and Medupi have run hopelessly behind the completion schedule and almost 100% over budget. They are largely responsible for Eskom’s enormous R450bn debt burden, which to a large extent is backed by government guarantees.
The problems at the power stations also contributed to power failures that crippled industry and pushed the economy into a recession even before the Covid-19 crisis.
A few hours after the announcement of the agreement with ABB, Eskom implemented stage 2 load-shedding across the country. This, however, only lasted a day and was suspended on Sunday.
Eskom was one of the state-owned entities damaged during the administration of former president Jacob Zuma, a period dubbed a stretch of “wasted years”. The power utility has been investigating all suspicious contracts for the past few years, with a view to recovering any losses it suffered as a result of criminal activities by its employees if they illegally colluded with some of the contractors.
Gupta family
Eskom has already recovered R1.1bn from global consultancy McKinsey and R171m from Deloitte. It has also instituted a claim for R3.8bn against members of the Gupta family, their associates, former Eskom executives and a former government minister, as well as a R95m claim against PwC.
After a lengthy investigation and negotiation, Eskom and the Special Investigating Unit (SIU) reached an agreement with ABB, which was signed at the power utility’s headquarters at Megawatt Park, Johannesburg, on Friday.
An application will be lodged in the high court to have the contract reviewed and set aside and criminal investigations are under way against former Eskom executives, but neither the power utility nor the SIU wanted to say who they are.
SIU head Andy Mothibi said the ABB agreement was reached after the company’s voluntary disclosure of alleged collusion with certain Eskom officials to irregularly award the company a R2.2bn contract in March 2015.
In July, Eskom named SA construction firm Stefanutti Stocks and ABB among the contractors it says were overpaid R4bn for work done at Kusile.
De Ruyter said Eskom was expecting to receive the R1.56bn from ABB before the end of 2020. The money recovered will be used to reduce debt and debt service costs, but De Ruyter said this amount was just more than 2% of Eskom’s debt.
To date, Eskom has paid ABB R3.1bn for the contract. De Ruyter said Eskom accepts that ABB performed work for which it received value, so it cannot claim the full amount.
The SIU has recommended that ABB be blacklisted from doing work with the state. However, Eskom says it will retain the company for now to finish work on Kusile, which is 90% complete. De Ruyter said Eskom will approach the Treasury with a request to continue with the execution of this work with ABB, on the proviso that the company does not make any profit. Finding a new contractor could delay the commissioning of Kusile, which is already behind schedule, for a further four years.
Public enterprises minister Pravin Gordhan has urged other contractors to make voluntary disclosures and avoid having the SIU come after them. “We need to ensure more and more of this work is done and intensified,” he said. “There are billions of rand that need to be hunted down.”
De Ruyter said that while procurement systems needed to be improved, state capture had shown it was difficult to design a system that was “criminal proof” and could withstand the best efforts of those who had bad intentions. He said the best defence at the end of the day was honest, loyal and committed employees.
“Rebuilding Eskom is a critical part of our turnaround. It is not only about rebuilding power stations, but it is also about restoring the morale and integrity of people who work at Eskom,” he said.
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