Power struggle jams nuclear fix-up

Eskom has inexplicably delayed for three years a multibillion-rand tender to replace ageing steam generators at the Koeberg nuclear power station.

Bidders are complaining about political interference in the estimated R2.6-billion tender and a ­senior Eskom executive has warned that the parastatal is flirting with “an urgent nuclear safety matter” because of the delay.

The two bidders are a consortium led by the French nuclear vendor, Areva, and their American-Japanese rival, Westinghouse. The generators produce power from pressurised steam created by the heat from the nuclear reactor core.

Eskom executives are desperate to finalise the contract to allow the long overdue overhaul of the steam generators.

However, sources close to the ­process say that the board – and its controversial acting chief executive Collin Matjila in particular – have raised numerous objections to their recommended contractor, believed to be Westinghouse.

Matjila, a non-executive director, chaired the board’s tender committee from 2011 until his appointment as acting chief executive in April this year, but in his new role he allegedly continues to place hurdles in the way of awarding a contract.

Eskom originally awarded the lion’s share of the tender in April 2011 to Westinghouse, and a smaller portion to Areva. But former public enterprises minister Malusi Gigaba stopped it, because large contracts require additional political approval.

Eskom invited both companies to bid again in 2012. Having dragged their feet on a decision for well over a year, the utility summoned bidders to a “competitive negotiation” on Tuesday this week – the equivalent of a sudden-death penalty shoot-out.

This development could be seen as a last-ditch attempt by the board ­tender committee to redirect the process before they are replaced. Incoming Public Enterprises Minister Lynne Brown told Talk Radio 702 in early June that she would replace Matjila and his fellow directors by the end of June.

A source well acquainted with one of the bidders’ participation in the tender said: “This board has taken three years to get nowhere on this contract. Now suddenly they rush to hold a one-day competitive negotiation presentation. Maybe they want to push this thing through before the new minister has come to grips with her portfoli o.”

Outcome is not yet known

The inability of Eskom’s executive, board and the minister to see eye to eye on the contract for more than three years has heightened suspicion that Matjila and interests aligned to him want the French bid to succeed.

Detailed questions sent to Eskom this week, including about Matjila’s role and alleged motives, went largely unanswered. In a short statement, an Eskom spokesperson wrote: “Eskom has strong governance processes in place to protect the integrity of procurement transactions. We follow a robust commercial process and take every precaution to ensure that the adjudication process is thorough and defendable. We are mindful of the need to be transparent on such matters but require respect for the process, which is still under review.”

Attempts to contact Matjila in his own capacity were unsuccessful. But a source sympathetic to Matjila says that he is only standing up to other interests backing Westinghouse.

History

Koeberg’s history is entwined with both Areva and Westinghouse. The French built the plant for the apartheid government using American reactor technology.

The stakes are high for both ­companies because they have been overtaken in the race for the much bigger contract for six new nuclear reactors by Russian and Chinese state-owned nuclear construction companies with stronger balance sheets, and Brics (Brazil, Russia, India, China and South Africa)membership.

Koeberg’s six steam generators date to the mid-1980s and must be replaced soon to extend the station’s life for another 30 years.

With its two reactors running at full capacity, Koeberg supplies 5% of the ­country’s total energy output. The Western Cape draws much of its power from the plant.

A year after Gigaba rescinded the tender, Eskom reissued it. Another year passed until the executive procure­ment committee recommended a winner – understood to be Westinghouse – to the board in November last year.

But the board’s tender committee that reviews the executive procurement committee’s tender process and approves the award has since raised objections.

These led to the contract being changed back to the split award, mooted back in 2011, and then changed back again to a single award proposed last November.

The source acquainted with one of the bidders’ participation said that Matjila appointed a legal specialist to review the recommendation while he chaired the board committee; and then ordered a second, overlapping legal review after he became chief executive.

The competing legal reviews apparently caused consternation among Eskom executives, when one of the reviews accused them of bias, said the source.

Eskom denied that Matjila continued to play a role in the contract decision after becoming acting chief executive because he had stepped down from the board tender committee to avoid a conflict of interest.

A well-placed Eskom source told amaBhungane that the board’s delay in approving the executive committee’s recommendation contributed to Matjila’s predecessor, former chief executive Brian Dames, walking away from the utility after a 27-year career.

“Dames wrote at least twice to the board, documenting his views. He felt that his team had answered all the board tender committee’s questions, and that the process needed to be concluded because it had become an urgent nuclear safety matter.”

Dames declined to comment because he is no longer at Eskom. He referred questions to the utility. – Additional reporting by Matuma Letsoalo

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The M&G Centre for Investigative Journalism (amaBhungane) produced this story. All views are ours. See www.amabhungane.co.za for our stories, activities and funding sources.

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