In June 2020, Eskom alleged that it had overpaid around R4-billion to various contractors involved in the construction of the 4,800MW coal-fired Kusile Power Station. The overpaid amounts were broken down into R1-billion each for Stefanutti, multinational ABB, and Tubular Construction Projects, with another R735-million to Tenova Mining and Minerals and another R180-million to “various site service contractors”.

The construction of the power station was initially expected to take six years to complete at a cost of R81-billion, but since work kicked off in 2008, costs have risen to R161-billion and in June this year, Eskom said it expected Kusile to be fully operational by May 2024, 10 years later than initially expected.

Stefanutti and Eskom entered into an interim arrangement in February 2020 to appoint independent experts to determine the causes, duration and to quantify all delay events up to 31 December 2019. They agreed that the Dispute Adjudication Board would then issue a final, binding decision, which Eskom and Stefanutti would abide by.

Since August 2021, Eskom has paid the company R110-million. However, Stefanutti this week released an update revealing to shareholders that it had submitted an overarching preliminary and general cost claim and a subcontractor overarching preliminary and general cost claim of R337-million and R194-million respectively.

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The company also submitted to experts a provisional construction cost claim of R438-million and a finance cost claim of R171-million on 20 December, which means the total quantum of the provisional claims submitted is R1.14-billion.

Stefanutti anticipates that it will submit the remaining claims relating to commissioning costs and interest to the experts in the new year and that the adjudication board will issue a binding decision during the second quarter of 2023. Both Eskom and Stefanutti will still have the right, at that point, to issue a notice of dissatisfaction and refer the dispute to arbitration.

The issue is not small for Stefanutti, which reported a 9% fall in contract revenue to R2.9-billion for the six months to end December and absorbed restructuring and abnormal legal fees of R28-million in the reporting period. The group’s order book is currently R6.3-billion of which R1.6-billion arises from work beyond South Africa’s borders.

Chief executive Russell Crawford says the company continues to be negatively affected by disruptive and unlawful activities by certain communities and informal business forums in several areas of South Africa.

“The weakened post-Covid 19 economy has been further exacerbated by the Russia and Ukraine conflict, resulting in increased interest and inflation rates, which drives increases in raw material and fuel costs. These increases, together with continuous power supply disruptions and disruptive floods in KwaZulu-Natal in April 2022, continued to put pressure on the group’s operations and that of its customers,” he says. BM/DM