Eskom recovers R1.56bn from tech firm ABB

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Eskom CEO André de Ruyter.
Eskom CEO André de Ruyter.

Technology company ABB has paid power utility Eskom R1.56 billion as a result of corrupt activities flagged at Kusile Power Station.

In a statement today, the power utility says after lengthy investigation and negotiations, Eskom and the Special Investigating Unit (SIU) have reached an agreement with ABB South Africa in terms of which ABB South Africa will pay Eskom R1.56 billion in full and final settlement of an overpayment dispute relating to a contract unlawfully awarded through corrupt means for work at the Kusile Power Station.

The settlement is inclusive of the capital amount and interest, says Eskom, adding that the agreement will be subject to the review of the High Court in due course.

On its Web site, ABB says “is one of the world’s leading power and automation engineering companies with a diverse portfolio of products and services including energy-efficient transmission and distribution of electricity which helps to increase productivity of the industrial, commercial and utility sectors”.

Its portfolio of products and services range from robots that can print cars, light switches, large electrical transformers to control systems that manage entire power networks and factories.

Following the settlement, Advocate Andy Mothibi, head of the SIU said: “We are delighted at this settlement, which is an important vindication of the tireless efforts of the SIU investigators working in close co-operation with the Eskom and ABB teams.”

Eskom notes that the investigation arose as a result of ABB’s voluntary disclosure of alleged collusion with certain Eskom officials to irregularly award ABB a R2.2 billion Control & Instrumentation (C&I) contract for the Kusile Power Station during March 2015.

It adds that the settlement agreement is a culmination of years of work by the parties, as well as detailed investigations by the Special Investigations Tribunal in terms of the Proclamation R11 of 2018.

With regard to this and other contracts in which evidence of criminal activity has been established, Eskom and the SIU have laid dozens of criminal cases with the law enforcement agencies.

Further to the collusion in awarding the contract, certain Eskom officials illegally and fraudulently induced Eskom to pay an estimated R800 million to ABB in illegal variation orders, says the power utility.

“In order to avoid lengthy and protracted litigation, Eskom and the SIU agreed that the settlement amount is a fair and reasonable reflection of the damages that Eskom, and by implication the people of South Africa, suffered as a result of this unlawful contract,” says André de Ruyter, group chief executive of Eskom.

The utility points out that two former executives of Eskom have already appeared in court and are being prosecuted in connection with these and other irregularities.

Eskom accepts that ABB has performed parts of its obligations on the contract, with the implementation of the technology on the power station currently standing at 90%, says the state-owned company.

“It is with this in mind that Eskom, despite the contract being unlawful, is only claiming from ABB the portion of payment in excess of what was independently determined as being a fair and reasonable contract value,” the company says.

Similarly, it adds, the parties accept that, in the spirit of concluding this agreement in full and final settlement of the overpayment dispute, ABB and Eskom mutually waive any claims they may have against the other in respect of work done on Units 1 and 2.

“Due to the critical nature of the work that is now 90% complete, the parties have agreed to continue installing ABB’s C&I technology at Kusile on terms similar to the original contract, but without any profit accruing to ABB as it would not be feasible and not in the national interest to replace the contractor at this late stage,” Eskom says.

Jan Oberholzer, chief operating officer of Eskom says: “Changing the C&I contractor at this late stage would delay the completion of Kusile by about four years, lead to significant claims from other contractors, displace maintenance scheduled on the existing fleet and will increase the risk of loadshedding.”

The recovered R1.56 billion will be used to reduce Eskom’s debt and debt service cost.

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