20100412
BUSINESS DAY

Johannesburg — ESKOM said on Friday Siemens would not benefit from new contracts financed through the World Bank loan for the Medupi power station because of a settlement agreement between the bank and Siemens following the company's admission of corruption in some of its businesses.

The exclusion of Siemens contracts from the World Bank funds is the result of a corruption and bribery scandal that rocked the engineering giant in several countries. In the past few years, Siemens has faced various corruption and bribery allegations, and has subsequently been hit with fines for its transgressions.

Siemens southern African energy division is a major supplier to Eskom's power stations.

A settlement agreement between the bank and Siemens, reached in July last year, includes a "voluntary restraint" in which Siemens undertook to refrain from bidding on World Bankfinanced activities or projects for two years, beginning January last year until December this year. In that period, Siemens will not be a supplier or manufacturer of goods or be a supplier or subcontractor for works and services.

The agreement, however, allows Siemens to continue with the implementation of existing contracts concluded before January last year.

Eskom finance director Paul O'Flaherty on Friday confirmed that Siemens would not benefit from contracts financed from the World Bank loan.

O'Flaherty said, prior to the approval of the loan, the international bank reviewed Eskom's processes. "The bank did a full review of all the contracts we have placed. Remember we applied for the loan when work on Medupi had already started," he said.

In the agreement, Siemens undertook to fight fraud and corruption. "Siemens will also continue to provide information on any additional cases of wrongdoing related to past, present and future (World) Bank projects in which Siemens is involved to the bank's institutional integrity vice-presidency, which investigates fraud and corruption in (World) Bank group-financed activities," it said.

In the settlement the company also agreed to pay 100m over the next 15 years "to support anticorruption work".