Cape Town - Strong measures were taken against Hitachi for its "sub-standard work" in the building of the Medupi power station in Limpopo, Public Enterprises Minister Malusi Gigaba has revealed.
Hitachi Power Africa's performance bond was called up in February, according to a written reply Gigaba gave to a question from Freedom Front Plus MP Anton Alberts. Alberts released the reply on Friday.
A performance bond protects a client, in this case Eskom, against losses resulting from a contractor's failure to meet its obligations. It is issued by an insurance company or bank.
Hitachi's failure to implement appropriate plans to rectify its performance to Eskom’s satisfaction was cited as a reason for the power utility's action.
Construction at Medupi has been delayed due to failures by Hitachi to deliver top quality boilers at the plant. The welds on the boilers were found to be sub-standard.
"The calling up of a performance bond is considered to be a standard operating procedure agreed between the two," Gigaba said.
In March Eskom called up French company Alstom's performance bond. This meant Alstom lost 10% of its contract price because its systems failed, further delaying the Medupi project. Alstom is creating the software for the boiler systems.
In the same month, Eskom CEO Brian Dames was quoted as saying they were considering cancelling two key contracts.
The contracts are with Hitachi, in which the ANC's investment arm Chancellor House has a 25% stake, and Alstom.
Eskom spokesperson Hilary Joffe on Friday said there were no immediate plans to cancel the contracts and that Hitachi was still in charge of building the boilers.
Alberts said he was disappointed about the failures at Medupi. He believed the power plant could miss its deadline of coming on line in December. This would put serious strain on the power grid, which experts said could lead to blackouts next year.
"According to reports, the ANC had at the beginning of 2013 already earned R1bn from the investment. The contract had amounted to R38.5bn.
"The struggling Medupi project had, as a result of various problems, never got off the ground properly," Alberts said.