ANC front made 5 000% power profit
INFLUENCE PEDDLING: BUT MEDUPI STILL NOT READY Hitachi’s settlement last week with SEC was not an admission of guilt, but issue is far from settled.
Hitachi’s $19 million settlement with the US Securities and Exchange Commission (SEC) shows the ANC’s investment arm, Chancellor House, made a 5 000% profit on its investment in the local Hitachi unit.
The SEC last week said Hitachi had “inaccurately recorded improper payment” to an arm of South Africa’s ruling African National Congress. Hitachi neither admitted guilt nor denied the allegations, the SEC said. It said the Japanese company landed $5.6 billion in contracts to build boilers for new power plants intended to boost SA’s electricity generation capacity by 25%.
A decade after the construction of the plants was ordered, with four years of delays, Africa’s most developed economy is left with regular power cuts. The shortages fed into a 1.3% economic contraction in the second quarter.
A Hitachi spokesperson in the UK, Kelly Smith, said the company was unable to comment because of its settlement conditions. The ANC “categorically states” it wasn’t “involved, implicated or approached to answer on anything relating to the charges brought against Hitachi”, the party said.
Chancellor House didn’t respond to e-mailed questions.
Chancellor House is also active in real estate, mining and oil and gas, it said.
In April 2013, Eskom said Hitachi had agreed to repair about 9 000 faulty welds at the Medupi power plant and had assured it that a timetable to start Medupi power generation by the end of 2013 would be adhered to.
But the first of Medupi’s six units began supplying power only a few months ago. The rest have yet to start up.
Eskom’s tendering process for the boiler contracts was “open, legitimate and above board”, spokesperson Khulu Phasiwe said.
Eskom hadn’t ordered a major new power plant since the mid-1980s so, in 2006, the government gave the final go-ahead to build two of the world’s biggest coal-powered facilities, Medupi and Kusile, at about 4 800 megawatts each.
Hitachi Power Europe was keen to land some of the contracts and set up a joint venture with Chancellor House called Hitachi Power Africa in preparation, according to the SEC complaint.
The company’s acquisition of a stake in Hitachi’s African unit met the government’s black economic empowerment criteria for state contracts. Chancellor House was “doing its very best” to help Hitachi win the boiler contract, Hitachi officials said. In 2007, Eskom said it awarded Hitachi a contract for Medupi’s boilers. The next year Hitachi won a similar contract for Kusile.
Chancellor House paid $190 819 for its stake in 2005. By July 2008, Hitachi’s African unit started making payments of success fees and dividends totalling about $6 million. In February 2012, it also paid Chancellor House $4.5 million to buy its 25% stake, giving the ANC front company a 5 000% return on its investment, SEC documents show. – Bloomberg