Stefanutti Stocks’ R1.6bn claim against Eskom expected to be resolved in Q3

Stefanutti Stocks expects a binding, final decision on its R1.614 billion claim against Eskom related to a Kusile building project to be published by the Dispute Adjudication Board (DAB) during the third quarter of 2024.

Stefanutti Stocks CEO Russell Crawford confirmed this on Thursday but warned that on conclusion of the process, either party may issue a notice of dissatisfaction with the ruling and refer the dispute to arbitration.

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However, Crawford stressed that the ruling will remain enforceable unless and until overturned in arbitration.

Since August 2021, the group has secured payment of a combined total of R119 million for measured work and the DAB rulings.

Crawford said Stefanutti Stocks remains confident that the DAB will be in a position to arrive at a final financial outcome.

“The quantum experts and DAB are continuing to meet on various matters related to quantum principles and good progress has been made,” he said.

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“The remaining quantum matters in dispute have been narrowed down substantially.”

Some background

The contract was awarded by Eskom to the Stefanutti Stocks Basil Read joint venture (JV).

Basil Read, which is in business rescue, sold its 50% stake in the JV effective from 1 September 2017.

The amount claimed by Stefanutti Stocks is referred to as “Claim 5” and covers the period up to 31 December 2019.

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The claim was based on the delay analysis as calculated by the JV’s delay expert and will be adjusted once the delay analysis is complete and agreed upon.

However, Crawford said interest was not included in the claim and would only be calculated once the contractor’s entitlement had been quantified.

Claim 6

Crawford said the group commissioned the final commissioning work for the project during March, and the closing out of final snags and contract documentation is expected to be completed by the end of May.

In regard to the measurement of work done on the project, he said the only items remaining to be concluded in the final measure are:

• Contract price adjustment, with the group currently reconciling and checking the calculations; and
• A large variation related to transport, which remains unresolved between Stefanutti Stocks and Eskom, and will either be agreed upon or referred to the DAB as a separate dispute.

“The agreement of the final account is planned to be concluded during the third quarter 2024,” he said.

“Claim 6” covers events and circumstances that allegedly gave rise to the entitlement for an extension of time plus costs, which occurred after December 2019.

Crawford said there is an element of overlap between certain Claim 5 events, the effects of which have an impact on the critical path with respect to Claim 6’s period.

He said Claim 6 will therefore be dealt with once the Claim 5 entitlement has been resolved.

Another dispute

The group is also involved in a dispute with Eskom related to another Kusile Power Station project, Package 28, which was awarded to the Stefanutti Stocks-Izazi JV.

Crawford said the re-measurement and final value of the direct works were agreed between February and August 2022, and this engagement process is now “at an advanced stage with a final account agreement being in discussions between the parties”.

Stefanutti Stocks is still involved in litigation related to its successful arbitration award announced in November 2022 related to the Kalabo-Sikongo-Angola border gate road in the Western Province of Zambia.

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The group formed an equal JV with Consolidated Contractors Company from Kuwait in December 2016 for this public road project, but the JV terminated the contract in August 2019 due to the client’s failure to pay the interim payment certificates.

This resulted in a claim, which was referred to arbitration, and a ruling in November 2022 that the JV was entitled to be paid an amount of Zambian Kwacha 510 million divided into the following currencies:

• US$21 million;
• R81 million; and
• Zambian Kwacha 148 million.

The client applied to set aside the arbitral tribunal award, but this application was dismissed with costs on 4 October 2023.

Stefanutti Stocks said on Thursday that this award was subsequently registered with the Zambian courts to have the award made an order of the court to enforce its rights to commence proceedings to recover the quantum stipulated in the award.

However, Stefanutti Stocks said the client has submitted:

• An order for the stay of further proceedings pending the determination of the client’s application for leave to appeal;
• An affidavit in support of summons for an order to set aside the registration of the award; and
• Leave to appeal against the judgment.

Crawford said Stefanutti Stocks and its JV partner successfully filed a summons opposing the stay of further proceedings and have commenced discussions with the client with respect to a settlement.

Financial results

His comments were made following the release of Stefanutti Stocks’s financial results for the year to end-February 2024.

Crawford said the group delivered a solid performance for the year.

Contract revenue rose 17% to R7.1 billion from R6.1 billion.

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Operating profit from continuing operations increased by 107% to R210 million from R101 million.

Profit for the year from total operations improved slightly to R16 million from R15 million.

The group reported an increase in the headline loss per share to 55.73 cents from the headline loss of 38.73 cents the previous year.

Order book

The group’s current order book grew by 13.5% to R8.4 billion from R7.4 billion in the prior year, of which R1.8 billion is for work beyond South Africa’s borders.

Stefanutti Stocks reported that subsequent to year-end, a significant contract to the value of R1.3 billion was awarded to the group’s inland region but did not provide any further details about this contract award.

Crawford said the group has short-term potential awards to the value of R7 billion and future opportunities of R98 billion.

Challenges

Commenting on industry-related matters, Crawford said the group continues to be negatively affected by disruptive and unlawful activities by certain communities and informal business forums throughout South Africa.

Crawford said there also continues to be a lack of public sector infrastructure expenditure in South Africa, and that should this improve it will benefit the group.

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He said the regulations of the Employment Equity Amendment Bill were republished in February 2024 for public comment following further submissions by social partners and stakeholders, including the construction sector.

Crawford said it is anticipated that the bill and the regulations will be promulgated later this year but the risk remains that the targets will be set without meaningful consultation or supported by scientific data.

This article was republished from Moneyweb. Read the original article here