CNEEC, BPC staff fleece Morupule B of P 1 billion- report

11 Feb 2019

Botswana Power Corporation (BPC) key staff members are believed to have colluded with a Chinese contractor to embezzle more than P 1 billion from the multi-billion Pula Morupule B power project - a forensic investigation has revealed.

The plant which accumulated cost overruns in excess of P 8 billion was initially budgeted for USD 905.4million (P 9.8 billion at current ) but costs had ballooned to USD 1.660 (P18 billion) in 2014 when the Chinese contractor was kicked out of the site. The current figure is believed to be much higher.

A forensic investigation draft report by FTI Consulting from South Africa has revealed that at least P 1 billion of the budgeted money was misappropriated. The report, a copy of which has been passed to the Sunday Standard, reveals how either incompetence or complicity by a former BPC Chief Executive Officer Jacob Raleru and his charges resulted in the misappropriation of more than P 1 billion through illegal payments, duplicate invoices and shady contracts with CNEEC, the Chinese company contracted to build Morupule B Power Station.

The audit revealed that BPC paid the Chinese company USD 65,333,000 (P672 929,900) although the Chinese company had not complied with base load guarantees. “From the information available it seems that the amount was paid to CNEEC despite not having complied with guaranteed levels”, states the report.

Additional investigation by the Sunday Standard has revealed how the BPC command sacked the Morupule B project Manager in 2015 for refusing to sign off CNEEC boilers because he had not seen them. At the time, the Owners engineers were also complaining about the poor quality of CNEEC work.

After the Project Manager was fired, BPC brought in Glen Black who was seconded from Debswana and was allegedly in the pocket of the Chinese contractor. Black was allegedly brought in to bypass the Owners Engineer and sign off all quality and design documents every morning from the Chinese contractor.

The draft audit report confirmed that Black was bidding for CNEEC. The forensic audit further revealed that the BPC is saddled with a USD 32, 405, 638, 10 (about P 335 million) from a shady Operation and Maintenance (O&M) agreement with CNEEC spearheaded by Black.

The report states that, “indications of a preferential treatment relationship between Black and the CNEEC are evident in the process followed in the appointment of CNEEC to provide O&M services at the Morupule B Power Station. In terms of a stipulation contained in the main EPC contract, BPC was to negotiate the terms of reference for O&M services with CNEEC, near completion of construction and before commissioning of the power station.

A BPC committee was established of which Black was a member. Black appointed CNEEC as an O&M services provider through a letter while negotiations were not finalized. The letter was followed by a one page document purporting to be an agreement between BPC and CNEEC concerning the O&M services.

The document was signed by the former CEO of BPC (Jacob Raleru), while abroad with a BPC delegation in the Republic of China. Black was present during the visit”, states the forensic report.

“According to the committee members the agreement for O&M services allegedly negotiated was still in draft form and never signed. Due to non performance in terms of the O&M services, BPC cancelled the agreement with CNEEC and appointed STEAG who took over on 1 January 2014.

The Chinese contractor has however presented a USD 32,405, 638.10 invoices for claimed O&M services provided. “The forensic audit carried out by us indicates that the claim could possibly be made on the strength of a contract entered into by individuals representing BPC during a period when the O&M contract evaluation and adjudication process was still ongoing. The validity of the contract is therefore questionable”, states the audit report.

For his pains, Glen Black was paid a P2, 7 million bonus as a retention fee to stay on for an extended period. He however resigned prematurely.

It further emerged in the report that BPC overpaid the Chinese contractor by P 15, 200,629.06 through duplicate invoices. The forensic auditor estimated “potential additional over-payments to CNEEC to be around USD 6, 738,503 (about P 70 million).