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US Hitachi net may spread to Eskom

Sep 30 2015 07:18
Fin24 correspondent

Cape Town - Startling revelations following investigations by the US Securities and Exchange Commission have lifted the veil of secrecy in the relationship between ANC funding front Chancellor House and Hitachi Power Africa.

The case has also raised questions about possible manipulation of major contracts at government-owned power utility Eskom, with claims of behind-the-scenes manoeuvering to influence tenders.

Hitachi went to great lengths to conceal the controversial "success fee" with ANC funding front Chancellor House, the commission has found.

Hitachi paid Chancellor House about $1m (R13.9m), which was essentially an incentive for Chancellor House to influence tenders for Hitachi.

READ: US: Hitachi made improper payments to ANC

Hitachi was awarded major contracts for Eskom's new power stations, Medupi and Kusile.

It has emerged that the company tried to keep the "success fee" arrangement under wraps. The efforts to cover tracks is consistent with the secrecy that has shrouded the entire arrangement between Hitachi and Chancellor House.

Previous responses from those closest to the deal ranged from robust denials to reluctant admissions.

Quoting a November 2005 Hitachi email, the commission has claimed that Hitachi moved to remove the "success fee" from the shareholders' agreement. This was because customers would pick up the clause during BEE audits "and it is felt that such a clause could be interpreted in a way which it is not intended".

Instead, in an unsigned and separate agreement, Hitachi promised to pay Chancellor House for influencing power station tenders at Eskom.

In terms of the agreement, Hitachi would pay Chancellor House "for active involvement and support" to Hitachi during the tender adjudication phase of a project "and the award of an order to (Hitachi) must be substantially as a result of Chancellor's efforts within its reasonable sphere of influence".

Securities and Exchange Commission charge sheet

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