ABB said it expected to be sanctioned if the payments were found to have failed compliance. File Photo: IOL

JOHANNESBURG – Swiss technology company ABB Group has confirmed that it was being investigated over suspected payments related to work it carried out for struggling power utility Eskom.

ABB said it had informed US and South African authorities about the payments.

The Zurich-based company took a write-down against the $160 million (R2.34 billion) contract, awarded in 2015 and involving the Kusile power plant in Mpumalanga.

The R118.5bn power station will be the first in South Africa to install flue-gas desulphurisation – a state-of-the-art technology used to remove oxides of sulphur, such as sulphur dioxide, from exhaust flue gases in power plants that burn coal or oil. 

In its third-quarter earnings published on Wednesday, ABB said it “self-reported” the payments to the US Department of Justice and the US Securities and Exchange Commission and was co-operating with the probes.

In a statement, ABB said it expected to be sanctioned if the payments were found to have failed compliance. 

“ABB believes that there may be an unfavourable outcome in one or more of these compliance-related matters,” it said. 

“It is not possible for the company to make an informed judgement about the possible financial impact.”

Eskom was not immediately available for comment, but the troubled power utility has been on a drive, including going to court, to recoup monies that were stolen from it a few years ago.

ABB is not the first international company to be smeared with graft allegations related to Eskom, which was also central to allegations of state capture. 

US worldwide management consulting firm McKinsey has been forced to return the R1bn it earned for unlawful contracts at Eskom.

German software giant SAP is also being probed in the US for how it won contracts with state-owned companies such as Eskom and Transnet.  

ABB reported a $422m net income from continuing operations for the third quarter, 1 percent lower year-on-year.

Operational earnings before interest taxes and amortisation margin of 11.7 percent was impacted by a combined 190 basis points.

ABB chairperson and chief executive Peter Voser said the group delivered a robust performance for the quarter in the face of weaker macroeconomic conditions impacting some of their customer markets, above all robotics and automation.

“We are holding course and pursuing long-term growth, staying firmly focused on managing costs in response to softer demand while progressing our transformation agenda,” Voser said. 

“We continue to drive the strategy forward, while instilling a culture of empowerment and high performance.”

ABB said macroeconomic indicators were mixed in Europe and China, while they weakened in the US. Global markets overall remain affected by geopolitical uncertainties.

Compared with macroeconomic indicators, the end-markets in which ABB operated were showing resilience, with headwinds in some markets, particularly discrete industries.

ABB said oil prices and foreign exchange translation effects were expected to continue to influence the company's results.

BUSINESS REPORT