Japanese engineers Hitachi and Mitsubishi Heavy Industries (MHI) today settled a years-long dispute over two disastrous power station projects they worked together on in South Africa.
The pair disagreed over who bore responsibility for large cost hikes in the boiler contracts for Medupi and Kusile coal-fired power plants commissioned by Eskom, South Africa’s state energy company.
In February 2017 MHI demanded 89.7 billion rand in compensation, about $6.25bn at today’s rates.Â
Yesterday, Nikkei Asian Review reported that as a result of ongoing arbitration the boards of the two companies were set to agree a smaller settlement of approximately $4.6bn.
Today they announced an agreement had been reached but did not disclose the settlement amount.Â Â
The two plants, which together have a generating capacity of 9.6GW, were intended to be the backbone of South Africa’s power system.
Hitachi was awarded a contract worth around $5.2bn to supply super-critical boilers for Medupi in 2007 and Kusile in 2008. In 2014, these contracts were taken over by Mitsubishi Hitachi Power Systems, a joint venture 65% owned by Mitsubishi.
Both projects suffered lengthy delays and huge cost overruns caused by a number of technical problems, which were exacerbated by violent labour disputes.
Medupi was fully completed in August; three of Kusile’s six boilers are in operation, but final completion is not expected before 2021.
Image: Kusile power station (JMK/CC BY-SA 4.0)
As a South African whom has dealt with continued fraud and labour disputes ,I can tell you this…..Any operation in South Africa is a recipe for disaster ! The government is NOT business friendly. The unions have total control and can shut down ANY project you may be committed to in SA. The RAMPANT theft and corruption will destroy any profit you intend on making.
Conclusion: If you are a multinational looking for SA contracts …BE WARNED. No one is your friend and no one will assist if labourers strike or theft and corruption cripple your endeavours . Again BE WARNED ,operations in SA are destined for DOOM.
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