South African construction giant’s R685 million Eskom payday

Stefanutti Stocks and Eskom have reached a significant milestone in their nearly two-decade-long dispute over a 2008 tender for the Kusile Power Plant.

A recent judgment will see Eskom pay Stefanutti an additional R685 million, although the matter is not yet over.

This dispute stemmed from a 2008 Eskom tender, a joint venture with private construction companies, including Stefanutti, working on the utility’s Kusile Power Station.

The original contract was for six years, with a completion date of November 2016. The planned construction duration was 19,000 days.

However, there were consistent project delays due to site access and other construction problems.

Independent experts, in conjunction with the Dispute Adjudication Board (DAB), found that the project experienced more than 75,000 days of delays.

Stefanutti claimed that Eskom interfered with its work in a way that was in breach of its original contract. This caused the project to progress much slower than expected.

Due to the delays, Stefanutti incurred significant prolongation costs and approached the DAB to assess Eskom’s claims.

The construction company submitted a claim amount payable by Eskom for at least R1.6 billion, excluding interest.

In the meantime, this project took a significant toll on Stefanutti’s balance sheet. For the first time in 2022, its total liabilities exceeded its total assets, rendering the company technically insolvent.

On Monday, 20 October 2024, Stefanutti informed shareholders that the DAB has issued its sub-clause 20.4 decision. 

In terms of the award, Stefanutti is entitled to additional payment in the total amount of R685 million, excluding VAT.

“Both parties have the right to refer the decision to arbitration; however, in terms of the Contract, the decision is binding and must be given effect to, unless and until it is revised by amicable settlement or an arbitral award,” the company said.

The company explained that, once Eskom has made payment, Stefanutti will use the funds received to settle costs associated with the claim and make a capital repayment towards the loan.

Stefanutti has also submitted another claim, claim 6, for delay events after 31 December 2019, through the contractual process.

“Eskom has also submitted its delay damages claim for late completion, which Stefanutti Stocks is defending through the contractual process,” it said.

“Should claim 6 and/or the delay damages claims not be resolved through the contractual processes, these will be referred to the DAB for resolution.”