Former Eskom CEO Matshela Koko and 16 others in the dock on fraud charges

By Paul Burkhardt and S'thembile Cele

(Bloomberg) – A former chief executive officer of South Africa's state power utility appeared in court on charges related to more than R2bn ($111m) of irregular contracts to build a coal-fired plant.

Matshela Koko was arraigned in the Magistrates Court at Middelburg in northeastern South Africa along with 16 other co-accused. The National Prosecuting Authority's Investigating Directorate arrested Koko in the early hours of Thursday morning.

The arrests may shed light on factors that contributed to the massive overspending related to Eskom's construction of two of the world's biggest coal-fired power plants – Kusile and Medupi. The projects were plagued by labor unrest, mismanagement and equipment defects from the outset, resulting in a succession of delays that have exacerbated nationwide electricity shortages.

The two plants, unfinished and only partially operational, were approved in 2007 and scheduled to be completed within eight years at a cost of R163bn. The likely final price tag has since ballooned to about R464bn, including interest costs, during construction.

Two years ago, Swiss manufacturer ABB Ltd. agreed to repay R1.56bn to Eskom after being ensnared in a corruption probe into the Kusile contract. In September it said it would make a non-operational provision of approximately $325m relating to remaining issues at the project.