Friday,
11 December 2020: After
lengthy investigation and negotiations, Eskom and the Special Investigating
Unit 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. The agreement will be subject to the review of the
High Court in due course.
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.”
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.
The
settlement agreement is a culmination of years of work by the parties, as well
as detailed investigations by the Special Investigations Tribunal (SIU) 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. “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,” said André de
Ruyter, Group Chief Executive of Eskom.
Two
former executives of Eskom have already appeared in court and are being
prosecuted in connection with these and other irregularities.
The
parties have agreed that the contract so irregularly entered into falls to be
set aside. In terms of the agreement, ABB shall pay to Eskom R1.56 billion in
full and final settlement of the overpayment dispute.
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%. 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.
Similarly,
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.
Jan
Oberholzer, Chief Operating Officer of Eskom said: “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.
As
previously communicated, Eskom has been investigating all suspicious contracts
for the past few years, with a view of recovering any losses it suffered as a
result of criminal activities by its own employees who may have illegally
colluded with some of the contractors. In this effort, Eskom has already
recovered R1.1 billion from McKinsey and R171 million from Deloitte Consulting.
Eskom has also instituted a claim for R3.8 billion against members of the Gupta
family, Gupta associates, former Eskom executives and a former Government
minister, as well as a R95 million claim against PwC.
Further
investigations against other contractors and suppliers, Eskom employees (former
and current) and other interested parties are ongoing, and further legal action
to recover embezzled funds will be instituted in the near future.
ENDS