Stefanutti Stocks' Claim on Eskom's Kusile Project Hits R1.6 Billion Amid Contractual Disputes

In a significant development for South Africa's construction industry, Stefanutti Stocks, a Johannesburg Stock Exchange (JSE)-listed construction company, has claimed damages to the tune of R1.614 billion against Eskom, the country's public electricity utility. This is a substantial increase from the previous figure, rising by R474 million as reported by the construction firm.

This claim, entitled 'Claim 5', encapsulates grievances up until December 31, 2019, while 'Claim 6' includes issues post-December 2019, alleging entitlement to extensions of time and associated costs on the Kusile building project. The claims arise from a joint venture initially formed with Basil Read, now under business rescue, which sold its 50% stake in the partnership to Stefanutti Stocks in September 2017.

Russell Crawford, CEO of Stefanutti Stocks, clarified that the claim is rooted in a delay analysis conducted by a delay expert regarding the joint venture (JV). The expectation is that adjustments will be made once the delay analysis is finalized and ratified. Intriguingly, the claim currently does not incorporate interest payments, which will be determined once the contractor’s entitlement is quantified.

As the complexity of the matters intensifies, Crawford noted an increase in the frequency and duration of meetings with the quantum experts and the Dispute Adjudication Board (DAB). A ruling, he said, is expected in the first quarter of the new financial year, which would be adhere to the contract's stipulations. Nevertheless, the ruling would be enforceable unless disproved in arbitration.

Stefanutti Stocks is entangled in another tussle with Eskom over the Kusile Power Station's project – Package 28. Despite allegations by Eskom in June 2020 of overpayments nearing R4 billion to multiple contractors at Kusile, of which R1 billion was linked to Stefanutti Stocks' JVs, Crawford reiterated the accuracy of the final payment application by the firm.

In February 2019, Eskom terminated the contract for Package 28 due to lack of access for the JV to complete their works. Subsequent final payment certificates suggested overpayments, pushing Stefanutti Stocks to notify of new disputes and engage in adjudications. Crawford confirmed that an independent expert has verified the work measured, and an agreement on final value has been reached, with further resolutions expected within the financial year.

Meanwhile, Stefanutti Stocks reported their results for the six-month period ending August 2023. Despite facing operational hiccups like contract terminations and fluctuating margins, the company marked a 27% improvement in operating profit, achieving R69 million up from R54 million the previous year. Their order book also displayed a modest growth of 3%, reaching R6.5 billion.

Challenged by community disruptions and stagnating public infrastructure expenditures, Stefanutti Stocks maintains its focus on completing restructuring plans, successfully concluding claims, and enhancing its profitability.

It is crucial for stakeholders and the wider public invested in the health of South Africa's infrastructure and energy sectors to monitor the outcomes of these disputes as they edge towards resolution. These developments have significant repercussions for the parties involved and the broader industry sentiment.

As the market closes, shares in Stefanutti Stocks fell slightly by 2.44% to R1.20, reflecting the uncertain environment amid ongoing legal confrontations and tough operational terrain.