ABB to pay US$104 million to settle South Africa power plant probe

ABB has agreed to pay 1.56 billion rand ($104 million) to South African state power utility Eskom to settle an investigation into improper payments and compliance issues, the two companies said on Friday.

ABB was investigated by South Africa’s Special Investigating Unit (SIU) in relation to over-payments for work it carried out for Eskom at the Kusile power plant, which will be among the largest coal-fired plants in the world when complete.

Kusile and sister project Medupi were meant to help end crippling power cuts in Africa’s most industrialised economy but instead they have been beset by delays and faults that have hobbled their electricity output and helped swell Eskom’s debts to more than 480 billion rand.

“In order to avoid lengthy and protracted litigation, Eskom and the SIU agreed that the settlement amount is a fair and reasonable reflection of the damages that Eskom, and by implication the people of South Africa, suffered as a result of this unlawful contract,” said Andre de Ruyter, Eskom CEO.

ABB said the majority of the payment had already been recognised in its financial results over the last 15 months. There would be an additional impact of $30 million on its operational earnings before interest, tax and amortisation during the fourth quarter, while cash flow would be reduced by $110 million.

The industrial robots and drives maker, which self-reported the problems to the U.S. and South African authorities last year, said it would continue to cooperate with investigators and authorities in the United States, Germany and Switzerland.

“ABB intends to expeditiously close all related pending proceedings globally, the impact of which is currently not estimable,” the company said.

De Ruyter said Eskom expected proceeds from the ABB settlement before the end of the month.