Stefanutti Stocks secured payments from Eskom of R110 million for metered work, in addition to Disputes Review Board (DAB) rulings from August 2021 in relation to contracts it secured in joint ventures (JVs) for the Kusile Power Station.
Russell Crawford, CEO of the JSE-listed construction group, said on Thursday that major changes were still being agreed with Eskom.
According to him, the group has submitted provisional claims to the experts, taking into account all the payments received for the project so far:
- A total initial and general costs claim of R337 million; and
- A subcontractor covering an initial and total cost requirement of R194 million.
The intention, he said, is for the group to submit the remaining claims for construction costs, operating costs, interest and finance costs to experts by December.
In an update on the Eskom Stefanutti Stocks Basil Read BM Package 16 contract – and in particular events or circumstances that occurred before December 2019 that gave rise to the right to an extension – Crawford said there was agreement by experts: 964 on delays related to Access on 49 days, and 23,208 days of delay for construction-related delays.
He said the DAB would soon deal with interim rulings on differences of opinion among delay experts on delays in commissioning.
The original end date of the contract was November 2016, but it was agreed to postpone it to September 2021.
Crawford said the group expected the DAB to make its final binding decision in the second quarter of 2023, but stressed that both sides had the right to appeal.
“At this stage, the group’s claims team is unable to quantify the value of potential awards as claims must be subject to due process. Therefore, these temporary requirements were not recognized in the financial statements.
Stefanutti Stocks Izazi BM Package 28 litigation was initiated in June 2018 regarding two negative final payment certificates issued by the engineer in August 2019 and April 2020 alleging overpayments.
Court hearings were held in November 2020 and February 2021, but the claims process has not yet been concluded.
In June 2020, Eskom alleged in a briefing document on Kusile Power Station contract investigations that it “overpaid various contractors at the Kusile Power Station, including the two Stefanutti Shares, by approximately R1 billion” to their joint ventures.
Other alleged overpayments highlighted by Eskom at the time included:
- IBA South Africa, Package 21A – R1 billion;
- Tenova Mining and Minerals SA, parcels 24B, 24C and 24E – R735 million;
- Pipeline construction projects, packages 11A and 17A – R1 billion; and
- Various site service contracts not within the scope of the Special Investigation Unit (SIU) investigation – R180 million.
On Thursday, Eskom was asked to comment on the status of alleged overpayments to various contractors. Eskom referred Moneyweb to statements made on 2 June 2020 and 11 December 2020, adding that it “has no further comment on this matter”.
Neither statement mentions Stefanutti Stocks.
Eskom Group CEO André de Ruyter said in his first statement that Eskom is working closely with the South African Revenue Service (Sars), the SIU, the Hawks, “the JSE for listed companies” and its chief. Investigations conducted in the office of the National Director of Public Prosecutions.
The second statement mainly refers to an agreement in which ABB SA agreed to pay Eskom R1.56 billion in full and final settlement of an overpayment dispute related to a corruptly awarded contract for work at Kusile.
Recovery from McKinsey, Deloitte and others
There are also brief references to refunds from certain contractors, including R1.1 billion from McKinsey and R171 million from Deloitte Consulting, and a R3.8 billion lawsuit it has brought against members of the Gupta family, Gupta associates, the former Eskom. chief executives and a former government minister.
Further investigations are ongoing against other contractors and suppliers, former and current Eskom employees and other interested parties, the statement said.
Stefanutti Stocks continuously disputed the overpayment of it or the JVs it was a part of, which resulted in disputes being referred to the DAB.
Crawford said on Thursday that Stefanutti Stocks had an improved performance for the six months to the end of August.
However, he said, the decision-making and awarding of tenders – particularly in the public sector, where tender cancellations are common and an award can take up to two years – continues to affect the group’s performance.
Crawford said there is currently a shortage of public sector infrastructure spending.
“Over the past five years, the group’s revenue from public sector work has fallen by 50%,” he said.
Crawford said the group continues to be negatively impacted by certain communities and informal business forums in some parts of South Africa through its disruptive and illegal activities.
According to him, the group’s focus remains on reducing the number of harmful projects.
In the reporting period, seven of the 158 active projects posted a gross operating loss of R19 million compared to a total contract revenue of R130 million, with 78% of contract revenue performing better than the tender margin, compared to 59% in the previous period, he said.
The group on Thursday reported a 9.4% drop in contract revenue from continuing operations to R2.9 billion from a restated R3.2 billion in the prior period.
However, operating profit improved significantly to R54 million from a restated R9 million.
Excluding restructuring charges of R22 million and extraordinary legal costs of R6 million, Crawford said operating profit would have been R82 million with an improved operating margin of 2.9% from 2.7% in the previous period.
The group’s headline loss per share fell to 25.02 cents from 67.12 cents.
It has an order book of R6.3 billion, of which R1.6 billion relates to work outside South Africa.
Crawford said there were potential awards worth about R5.5 billion in the short term, while future opportunities worth about R69 billion had been identified by the group.
Shares in Stefanutti shares rose 6.19% to close at R1.03 per share on Thursday.