A BEE company that helped build Medupi and Kusile has turned a R20 million loan into R250 million – after a 5-year fight with its American partners

Business Insider SA
The Kusile power station under construction. (Elvira Wood)
  • A BEE company is due a payout of more than R250 million from its former American partners after a Supreme Court of Appeal judgment on Friday.
  • Local company Termico bought a stake in DB Technologies, which helped build mega power stations for Eskom, in 2006, using a R20 million loan from seller SPX.
  • When Termico tried to sell its shares in 2014, things got weird.
  • For more stories go to the Business Insider South Africa homepage.

A virtually unknown BEE holding company that was involved in the construction of Eskom's giant power station has landed a judgment worth more than R250 million against its former American partners – after a five-year legal wrangle.

On Friday the Supreme Court of Appeal (SCA) said the New York listed SPX Technologies must pay South African company Termico R256 million, plus interest for the last three years, as well as the cost of the appeal it took to secure the money.

Termico was the 25.1% empowerment shareholder in DB Technologies, a sub-contractor that helped to build parts of the Kusile and Medupi power stations for Eskom. SPX held the remaining shares.

When Termico bought that stake at the end of 2006, it was owned by four individuals.

The empowerment company paid R19.7 million for its shares, the SCA judgment shows, through a loan from the seller SPX. 

Despite trouble with the Eskom contracts, DB Technologies appears to have profited handsomely from its work in South Africa, with revenue shooting up from R250 million in 2007 to R2.4 billion by 2012.

The company paid virtually no dividends, from which the empowerment partners would have benefitted, but R1.26 billion did go to majority owner SPX "as fees and other charges", the SCA said.

Termico was locked into its shares for seven years, after which it could sell them back to SPX at a multiple of six times ebitda (earnings before interest, tax, depreciation and amortisation) minus net debt. In June 2014 the BEE company tried to exercise that option – and things got strange.

SPX first tried to argue about which financial year the ebtida numbers should come from, the SCA judgment shows. It then said it was exercising its own option to buy the shares, would not meet with Termico to figure out how much Termico still owed it on the original loan, and claimed Termico had repudiated its contract because Termico would not assist in a BEE evaluation for the company in which Termico no longer considered itself a shareholder.

When arbitrators ruled in favour of Termico, and said SPX must pay it around R290 million (minus the outstanding loan), the American company went to court, and won an order that the whole matter must go back to arbitration in front of a new panel, in part on the basis that the value of the outstanding loan had not yet been determined.

But on Friday the SCA said it was clear that the roughly R20 million loan Termico took out to buy its shares was worth around R32 million by mid-2018. That amount should be deducted from what SPX owes, the court said, so Termico should be paid R256 million plus interest.

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