Eskom takes action against contractors for financial collusion

Share this article: Share Tweet Share Share Share Email Share

JOHANNESBURG – Eskom is taking action against contractors and original equipment manufacturers (OEMs) for financial collusion and sub-standard work in the construction of the Medupi and Kusile power stations, which have contributed to tripling the costs of the power utility, says Minister of Public Enterprises Pravin Gordhan. “We are finding through a forensic process we are undertaking that OEMs fell short in the design and quality of work in the grinding of coal, filters and boilers. There is some hard talking to be done because somebody is making money from the doubling of Medupi costs; we are going to look at who is benefiting,” Gordhan said yesterday. He added that main contractors such as Hitachi had to answer for the poor quality of work, with double the costs initially set out. Sub-standard work and equipment supplied to the two power stations had resulted in them yielding less than the 2 400 megawatts they were supposed to contribute, Gordhan said. Construction on these two projects started in 2007 and 2008, but might only be fully completed after 2020, according to estimates.

“Kusile and Medupi are not adequately helping the public as they should,” Gordhan said.

Recent consultations had revealed that in the past two to three years, there had been a decline in the amount of money for low-level and major repairs, worsened by the lengthy process to acquire parts because in some instances they had to be custom built, he said.

A report of an investigation commissioned in 2015 by Eskom to law firm Dentons to look into the causes of load shedding, its financial crisis and the new build delays identified serious cause for concern regarding the manner in which Eskom awarded contracts for the supply of diesel and coal, among other shortcomings.

The law firm found that some of the contractors – who benefited from the nearly R30 billion that Eskom spent on diesel for its open-cycle gas turbines between 2013 and 2015 – were companies that had no footprint in the industry and may have been set up by Eskom employees themselves.

Dentons also found Eskom might have wasted R200m in just two years because it failed to secure the requisite discounts from its diesel suppliers.

Earlier this year energy expert Ted Blom told the National Energy Regulator of South Africa of massive over-expenditure on capital projects such as Medupi, Kusile and Ingula, estimating that as much as R1.3 trillion was missing from the utility.

Among the missing billions estimated by Blom were R100bn in cost overruns in Medupi, R100bn in Kusile, R30bn in Ingula, R2bn in Optimum Coal, R3bn in the Eskom treasury and R1bn in the transmission unit.

BUSINESS REPORT