Eskom's Koeberg nightmare: Bosses on warpath over 'out of control' R20bn nuclear plant upgrade project

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18-07-2022
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News 24
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Three senior managers were suspended over the latest delay in replacing costly steam generators at Koeberg.
Sources say plans are afoot to accuse Jan Oberholzer of corruption and to bring the matter before Parliament.
A sweeping forensic probe is likely to open "a can of worms" as the power utility moves to limit the possibility of any further delays.

Eskom has started a sweeping forensic probe into the cause of delays as well as claims running into hundreds of millions of rands linked to contracts worth R20 billion related to the refurbishment of Koeberg nuclear power station.

This comes after the power utility's chief executive, Andre de Ruyter, stated in a recent generation board meeting that it appeared Eskom was "not in control" of the contracts linked to major upgrades to extend the life of Eskom's only nuclear power station by another 20 years.

News24 has learned that Eskom's chief operations officer, Jan Oberholzer, has been on the warpath with staff at Koeberg for months over delays plaguing a key component of the project – the replacement of six steam generators, the largest expenditure item in a series of complex jobs that must be undertaken at the station.

3 project managers suspended

News24 has learned that three senior project managers, in charge of managing the steam generator replacement, have been suspended.

Heads rolled after the Constitutional Court on 16 May refused Eskom leave to appeal a Supreme Court of Appeal decision to overturn a previous high court decision in Eskom's favour.

Eskom was forced to modify the contract with Framatome, a French company appointed to manufacture and install six new steam generators, and to pay R865 million for two claims by the company related to delays in May.

Eskom's chief nuclear officer, Riedewaan Bakardien, suspended the SGR programme manager, Justice Gumede, Project Engineering Manager, Tommy Booysen, and the SGR Project Controls Manager, Jacky Major-Petersen, in early June, with full pay.

After the ConCourt's refusal to hear the appeal, it meant Eskom had 10 days to pay Framatome R630 million. This was apparently kept quiet for eight days, leaving Oberholzer and the chief financial officer, Calib Cassim, just two days to find the money.

The generation division board endorsed an investigation into the events at Koeberg – and, according to suspension letters seen by News24, the three suspended managers were removed to allow the investigation to proceed unhindered.

Claims of corruption

Now, Oberholzer and Eskom are preparing for further battles, with senior Eskom sources confirming that plans were afoot to accuse Oberholzer of corruption and to bring the matter before Parliament's standing committee on public accounts.

The details of the claims against Oberholzer are vague – but includes a claim that he had a financial interest in construction company WBHO, brought in last year to finish one of the necessary buildings for the outage, after Eskom subsidiary, Eskom Rotek Industries, faltered on the project.

"What will transpire from now onwards will take a serious turn for they won't be dealing with issues of victimisation alone, it will now be dealing with serious contractual discrepancies which will be explained and substantial proof provided. They have opened up a huge can of worms," a NUM shop steward wrote in an email, obtained by News24, to senior Eskom officials at Koeberg.

News24 has interviewed several senior Eskom officials and studied a range of documents, including minutes of a generation board meeting for this story, but none of the Eskom officials who spoke with News24 agreed to comment on the record as they were not authorised to speak about the confidential nature of the suspensions or the contractual problems with Framatome.

One senior Koeberg staff member told News24 that, undoubtedly, there was fault on both sides – with Eskom staff and Framatome. But the investigation would reveal the scope of the wrongdoing, they said.  

Delayed, and delayed again

In March this year, Eskom was forced to postpone a key component of the Koeberg refurbishment – the replacement of steam generators. Koeberg is a 1 800-megawatt nuclear facility, with two units, each of which has three steam generators.

To simplify the operation of a nuclear power station, like Koeberg, to understand the function of steam generators: heat generated by a nuclear reactor inside each unit is used to superheat water inside the steam generators, which then feed steam at extreme pressure into the turbines, which spin to generate electricity. Koeberg's current steam generators were built at the same time as the power station, in the 1980s.

The steam generator replacement (SGR) portion of the multibillion-rand project is estimated to be around 40% of the work – but 60% of the cost. The steam generators are manufactured overseas and assembled in China before being transported to Koeberg by sea and road. They are each about 20 metres tall and weigh an estimated 360 tonnes.

But the SGR project has faced significant delays. Initially scheduled to start in 2018, there were delays due to manufacturing errors, which were laid at the door of the main SGR contractor, Framatome.

Originally rescheduled to take place in January 2021, the SGR project was again postponed to January 2022 – but, it emerged, Eskom was still not ready.

On 22 December 2021, Oberholzer visited Koeberg to check on the readiness of the project, and found a storage building - that will be needed to house the old steam generators – was only at foundation level. He called the team back from leave to get the project going, documents show.

By March, Oberholzer announced that, instead of replacing the steam generators on Unit 2 during its outage scheduled to start later in March, Eskom would refuel the unit and implement plans to replace the steam generators on Unit 1 first. The unit is due for an outage starting in December.

According to senior Eskom sources, it was a major setback that could end up costing the power utility far more than it had bargained for.

Behind the scenes

While Oberholzer apologised to the country for the delay with the project on 4 March 2022, later that same day he had a meeting "after hours" – 15.30 on a Friday afternoon – with the project team.

Accounts of the meeting vary, with one person who was present saying Oberholzer was "direct and quite firm". Others, mainly those who bore the brunt of his anger, said in an official grievance filed the following Tuesday that Oberholzer subjected the team to "severe verbal and emotional abuse".

Oberholzer publicly blamed the project team for the SGR portion being removed from Unit 2's outage, but the team claimed that the accusations were false.

The grievance reads:

The aggrieved were falsely accused of not working hard, not having urgency and were encouraged to leave Eskom, threatened to reduce salaries, threatened to relocate, and teach the individuals in the group to do project management and manage the contract.

They were also aggrieved that Oberholzer did not give them an opportunity to respond before walking out. Oberholzer said during the grievance hearing that he had already apologised to the team for his anger at a later meeting, also in March, but he did not apologise for the message he conveyed.

The grievance is a startling step, one senior Eskom source said, from members of a team that had overseen a deterioration of the relationship with Framatome over many years, and were given an extra 12 months to be ready for the outage – only to be found wanting again a year later.

At the heart of the most recent delays is a failure by Eskom to ensure that five buildings, including a containment and storage building for the old steam generators and a 'hot' workshop, among three other buildings, were complete. There were also issues around proper equipment and notification of asbestos handling requirements, News24 understands.

The delays have exposed Eskom to significant claims from Framatome, who, according to the contract, can claim for loss of time and other issues resulting from delays.

Framatome is a contractor that has already been hit hard with claims by Eskom due to its own delays since 2018 – and one senior Eskom official agreed that it would be of paramount importance for Eskom to clean up its act on the project or face paying Framatome massive amounts of money for further delays Eskom could not afford.

Contempt

The grievance was resolved by the chairman, Cassim, recommending among other steps a session between the project team and Oberholzer, as well as Bakardien, to allow the team to air their side of the story and explain why they felt Framatome were to blame, not them.

Framatome has, according to one senior Koeberg source, filed extensive claims against Eskom, which has kept the project team extremely busy with defending the claims instead of running the project, among a host of other issues.

But, News24 has learned, that after the grievance was heard, the project team apparently hid from Oberholzer a court order, which instructed Eskom to pay Framatome R630 million for a claim it had won, for eight days. The court order said Eskom had to pay within 10 days. By the time it came to Oberholzer's attention, he had just two days to find the money.

The team, at the same time, reneged on an undertaking to pay Framatome R235 million, owed to the contractor for another claim lost during arbitration after giving Framatome officials an undertaking to pay the amount during a meeting.

Oberholzer and Cassim were forced to scramble to find the money to pay – or risk Eskom being declared in contempt of court, and without a contractor to replace the steam generators - in just two days.

Out of control

Before the payment could be made however, Oberholzer had to approach the Eskom generation division board to gain approval for the Framatome contract value to be increased. The board, chaired by De Ruyter, met on 26 May 2022.

"[De Ruyter] stated that it appeared that Eskom was not in control of this contract and there was no predictability around the scope, deliverables or contractor liabilities. It was requested that an external investigator be engaged to conduct a detailed investigation on the project," a draft of the board meeting minutes reads.

The board was unhappy with the short notice, but resolved to approve a modification to the Framatome contract – paving the way for more than R865 million to be paid.

Eskom has repeatedly pointed out that Koeberg continues to be operated safely, and one senior official told News24 this week that while the contract was badly managed with a "staggering level of incompetence", it had no impact on the safe operation of the nuclear plant.