Nuclear build: Eskom defends Areva contract

Eskom’s reply to an article by EE Publishers, republished on Moneyweb on the SGR proceedings at the Constitutional Court

Dear Sir,

The article by Aimee Clarke (Eskom – changing the goalposts and rules of the game at half-time? / Analysis: Awaiting ConCourt’s decision on Eskom’s R5bn nuclear contract), published in EE Publishers, Moneyweb and Daily Maverick of 27 May 2016 refers.

Eskom’s position that the strategic considerations were part and parcel of the tender evaluation criteria has never changed. This position is coupled with the contention that while  Westinghouse’s price offering was cheaper, it was never, at any stage, an outright winner of the steam generator replacement tender. The Eskom’s Board Tender Committee (“BTC”) was given two alternative re commendations by the executive Tender Committee, one in favour of each bidder. Ultimately, having considered all the information made available to it, the Board Tender Committee awarded the tender to Areva.

Westinghouse’s complaints that the strategic considerations were introduced in the middle of the tender, to favour Areva, are unfounded. When the matter was argued before the High Court, Eskom took the Court through the tender evaluation criteria and demonstrated that the strategic considerations were always included therein. Hence Westinghouse’s review application was dismissed with costs. When Westinghouse appealed against that judgment to the Supreme Court of Appeal (“SCA”), Eskom once again demonstrated the inclusion of the strategic considerations in the tender evaluation criteria. For whatever reason, and despite all the empirical and unchallenged evidence made available to it, the SCA rejected Eskom’s argument and held that the strategic considerations vitiated the entire tender. However, the SCA refused to substitute Westinghouse for Areva as it accepted Eskom’s argument that it was not a forgone conclusion that, if remitted for reconsideration, the tender would be awarded to Westinghouse, and furthermore, the SCA did not know how much work had already been done, while, at the same time the 2018 deadline, which was one of the main gatekeepers for this award, was looming.

Eskom has appealed to the Constitutional Court (“ConCourt”) against the SCA judgment. Again, Eskom has taken the ConCourt through the entire tender process and the fact that both Westinghouse and Areva were treated equally and fairly throughout the tender process in relation to the strategic considerations, which were always part and parcel of the tender evaluation criteria. This includes the change from a Lots based to a composite offer based tender, the bidders’ unreserved acceptance of and participation in the parallel negotiations, questions posed to them and the refusal by Westinghouse to disclose available float in its schedule, when Areva, on the other hand, was willing to disclose such critical information. Furthermore, Eskom explained to the ConCourt that Westinghouse had clearly admitted that it would not be able to meet the 2018 deadline.

Consequently, while it is still waiting for the ConCourt to make its ruling on the matter, and also does not wish to speculate about the possible outcome thereof, Eskom unashamedly maintains its view that, taking all relevant factors into account, including in particular, its nuclear safety culture, it appointed a bidder which had demonstrated overall value to Eskom and the country and that this was and still remains in the public interest.

Matshela Koko is Eskom’s Group Executive for Generation

Brought to you by Moneyweb