NEWS

Eskom Offered R800m 'Contigency Fee' To Dongfang

In the latest controversy to hit Eskom, it appears to have inflated the Chinese firm's fee.

03/07/2017 07:23 SAST | Updated 03/07/2017 08:39 SAST
Mike Hutchings / Reuters
The logo of state power utility Eskom is seen outside Cape Town's Koeberg nuclear power plant in this picture taken March 20, 2016. REUTERS/Mike Hutchings

In the latest controversy to hit Eskom, Business Day revealed on Monday that it planned to pay Chinese firm Dongfang an R800 million "contingency fee" over and above the R4 billion it would have paid the company to supply a new boiler for its Duvha power station in Mpumalanga.

This amount is also over and above the R600 million advance payment that Dongfang would have received.

On Friday, the high court in Johannesburg interdicted Eskom from continuing with the tender.

This followed a court bid launched by losing bidders General Electric and Murray & Roberts, in April. The court ruled that Eskom had to reconsider the tender.

In court, the companies reportedly argued that Dongfang's offer was R1billion more expensive than rival bids, even after it dropped its price from R6billion to R4 billion. It later emerged that an internal review of the process by Eskom recommended that Eskom should only negotiate with General Electric and Murray & Roberts.

Gupta-linked firm Trillian ultimately appears to have tipped the scales in Dongfang's favour by providing a "high-level cost benefit analysis" of the contract to Eskom, and recommending that the Chinese should get the contract.

Eskom has repeatedly argued that Dongfang was the cheapest option because its costs were fixed, but Business Day reported that this argument is weakened by the new revelations.

The R800 million fee is reportedly contained in an unredacted version of a board submission dated March 8, seeking approval for the Dongfang contract. Eskom's initial submission to court excluded any mention of this fee.