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The process of appointing a supplier for the replacement of Duvha Unit 3 which got damaged in March 2014 will be concluded next week.

There are currently three suppliers participating in the commercial process.

The procurement process followed the requirements of the Preferential Procurement Policy Framework Act (PPPFA) and the qualifying supplier was engaged for the negotiation phase during March and April 2016. The tender evaluation was conducted according to the 90:10 principles set out in the PPPFA and thus the lowest price will be the determining factor.

On 30 March 2014, Unit 3 got damaged as a result of over pressurisation of the boiler furnace. The furnace pressure had increased beyond the tolerance limit, resulting in a Class 5 explosion which led to the loss of a 600 MW unit. The entire unit was shut down and isolated as per standard operating procedure.

Given the potentially large insurance claim, a loss adjuster was appointed to act on behalf of both the insured and the re-insurers for the purpose of leading a process to determine the extent of the damage to the boiler and collaborate with Eskom engineers to reinstate the damaged property.

This insurance process, which included solicitation, review and costing of various solutions to recover the loss was completed in August 2015 and subsequently Eskom entered into a settlement agreement with its insurers. The settlement agreement provided for the replacement of the damaged property within a given period of time.

Eskom management obtained approval for the procurement strategy for the recovery of Duvha Unit 3 and the execution thereof in December 2015.

The allegations that Eskom has contracted a consultant to adjudicate the procurement process are baseless, misleading and malicious. At no stage has Eskom sought or utilised the services of any company to act as ‘middle man’ between Eskom and potential boiler suppliers.

Prior to the approval of the procurement strategy for the replacement of Duvha unit 3, the loss adjuster had approved the FEDIC Silver Book as an appropriate contracting strategy and all costings were based on such strategy. This strategy essentially seeks to contract on a turn-key basis where potential suppliers assume all construction and interface management risks.

Eskom therefore rejects with contempt the allegations that its senior executive management is closely aligned to procurement irregularities, and reserves its rights in this regard.

Issued by Eskom