Chinese firm demands P260m from BPC
Mbongeni Mguni | Friday December 5, 2014 13:47
The demand marks the first shot in what is expected to be a salvo of suits between the two parties centring on culpability for the delays in the construction of Morupule B.
According to financials laid before legislators this week, CNEEC has thrown the first punch in the legal dispute, which came to the fore last year as the dust settled from the troubled contract.
However, even as the Chinese demand their millions, the BPC is unfazed and says its own claims against the former contractor will eclipse the demands.
“The implementation of Morupule B project was delayed and the contract allows the Corporation to charge the contractor penalties for breach of contract and vice versa,” the BPC says.
“The contractor has submitted claims relating to events for extension of time which are in the process of being evaluated, quantified and negotiated.
“The Corporation believes the counter claims by the contractor, if successful, would not exceed the Corporation’s claims against the contractor.
“The contractor has submitted claims of P260 million relating to various contract matters which the Corporation considers are not due to the contractor.”
Originally due complete by October 2012, the power station has and continues to be plagued by technical faults that have included boiler failures, blockages, leakages while non-compliance with safety standards resulted in three fatalities in 2012.
The multi-billion Pula project has also suffered from unforeseen factors such as inclement weather and a truck drivers’ strike in South Africa.
CNEEC insiders previously told Mmegi that in some instances BPC staff were to blame for technical faults due to incorrect operation of the equipment installed at the plant.
“The air duct burner was burnt down due to overheating and overtime running of the furnace, which was strictly defined in Operations and Maintenance Manual and Manufacture Document,” officials said.
Officials also claimed that the company was actually losing money due to the delays in the power station’s completion and would complete the project at a financial deficit.
“The project has been delayed for over 18 months now and we have incurred out of budget costs of over P20 million a month,” one official said in April.
“We will not make any money in this project. In fact we are going to make a huge loss. But our president has said that despite the losses, we should make sure we deliver the project and bring it to completion.
The BPC, meanwhile, is fortified by the results of a May root cause analysis conducted by an American firm which purportedly forms the basis for the legal recourse the utility is seeking.
The BPC says instead of a takeover in October 2012, the final unit was handed over in May 2014 due to various defects and issues. CNEEC is currently attending to these defects under a two year Defects Notification Period which commenced in June.
Last year, Minerals, Energy and Water Resources minister, Kitso Mokaila first revealed that government, as the BPC’s sole shareholder, would seek recourse for the opportunity costs associated with the delays.
“If you were expecting to have the plant ready by October and by now you are continuing to import, that’s a cost that you are incurring,” he told Mmegi.
“As any contract goes along, you will do what is necessary and that’s why we are bringing in people who have the expertise and can say “now you can claim’.
“The costs go beyond just government and extend to the private sector who (have to) close when there’s no power. There’s also the opportunity costs that arise because there’s no power.”