Eskom to pay R1 billion penalty over Koeberg steam generator dispute

Power utility Eskom must pay French nuclear power company Framatome nearly R1 billion in a contractual dispute over the replacement of steam generators at the Koeberg Nuclear Power Station.

Eskom hauled the company formerly known as Areva to the Western Cape High Court to challenge adjudicator Peter Ramsden’s decisions on the merits and the quantum delivered in December 2022 and March 2023, respectively.

The entity’s contention was that both decisions were beyond his jurisdiction and failed to apply the rules of natural justice.

Eskom complained that Ramsden failed to take into account its submissions, issue a reasoned decision and decide the issues that he was required to decide.

In addition, Eskom stated that the adjudicator failed to receive and take into account its response to Framatome’s amended claim as well as its submissions when determining the quantum.

Eskom was also unhappy that the adjudicator accepted the amounts in the company’s amended claim without having enquired into the supporting documents or the details of the claim, failed to issue a reasoned decision and/or follow the procedure he laid down by himself.

The dispute dates back to 2014 when the parties concluded an agreement to replace the steam generators at Koeberg.

In terms of the contract, Framatome work included the supply and installation of two sets of three replacement steam generators, with one set to be installed in each of the reactor buildings at units one and two at Koeberg during their separate planned outages.

The work of replacing the steam generators can only be performed during maintenance and refuelling outages when the power station is offline and the outages are planned in advance and around Eskom’s operational requirements.

Eskom had scheduled the outage dates and planned to replace the steam generators but then twice postponed for a later date.

The power utility then informed Framatome that it would not be continuing with the steam generator replacement work during one of the outages.

However, the company notified Eskom of an event which required it to notify the power supplier of such an event and that it required compensation after the postponement. This was acknowledged by the project manager.

Eskom then unsuccessfully approached the adjudicator, claiming that both decisions were unenforceable as contractual obligations and need not be complied with as he exceeded his powers.

It later filed an application for several declarators, which acting Judge Renata Williams dismissed with costs on Thursday.

Framatome succeeded in its counter-application and Eskom was ordered to pay the company €35,288,582 (about R729 million) exclusive of value-added tax (VAT) and subject to the price adjustment for inflation pursuant to secondary option clause of the contract.

Payment is also pursuant to certain clauses of the contract, interest thereon calculated at the London Interbank Offered Rate applicable at the time for amounts due in other currencies

Additionally, Eskom must pay Framatome more than R256.6m exclusive of VAT and subject to the price adjustment for inflation pursuant to secondary option clause of the contract and pursuant to certain clauses including interest.

The power utility was also ordered to pay the costs of Framatome’s counter application including the costs of the company’s France-based attorneys.

“There is no basis to set aside the decisions of the adjudicator which are valid and binding. In terms of the parties’ contract Eskom was obliged to comply therewith,” acting Judge Williams ruled.

Eskom spokesperson Daphney Mokwena did not respond to requests for comment on Saturday.

Cape Times