Given the slower than expected roll-out of smart meters occasioned by the legal action brought about by Afrisake and Afriforum against the City of Tshwane (CoT), procurement processes under the Security of Revenue Project, and the resultant reluctance of funders to advance funds to the project whilst under legal challenge, Peu Capital Partners, its project company, Total Utilities Management Services (TUMS) and the City of Tshwane (CoT) have agreed in principle to terminate the CoT smart meter project as of 30 June 2015.
The CoT and TUMS have been in discussions for some time to explore options which included, among others, early mutual termination of the contract in a way that delivers a satisfactory resolution for all parties. The CoT has confirmed that TUMS has met its obligations under the Master Services Agreement (MSA), however the continuation of the MSA under the current legal circumstances is sub-optimal for both parties.
The CoT has decided to acquire the installed smart meter system together with all installed meters in order for the CoT to continue benefiting from the prepaid smart metering project and to ensure continuity of service to its customers. This includes all the meter related hardware and software including the vending and collections systems. In terms of the agreement reached, the CoT will appoint an independent valuer shortly in order to value the system as a basis for the parties agreeing the price and to facilitate the finalising of the termination agreement.
TUMS COO, Paul Renshall said, "Whilst both prepaid metering and smart metering are not new concepts in themselves, the combination of the two to create a prepaid smart metering platform in conjunction with an innovative off balance sheet funded solution was a world first. The TUMS system is established, robust and fully operational, having vended almost R5 billion of electricity during the CoT's current financial year.
The CoT has benefited from receiving this money upfront. Supported by the TUMS smart meter system the CoT electricity debtors' book has reduced significantly. To our knowledge no other party has successfully implemented a funded prepaid smart meter project of this scale or secured municipal revenue to this extent anywhere in the world."
Commenting on the TUMS solution and the mutually agreed termination, TUMS' CEO Busi Tshili stated, "We believe that the funding solution pioneered by TUMS will significantly change how infrastructure projects will be financed and rolled out in South Africa and on the African continent. It is therefore extremely unfortunate that this innovative manner of funding public infrastructure by the private sector has been sabotaged by the Afrisake and Afriforum legal action. Consequently, this has served to stifle an innovation that ultimately benefits the citizens of Tshwane. The legislated procurement framework in South Africa needs to be more supportive of funding innovation."
As this is a technically complex project, the CoT has also requested that TUMS provides ongoing support, including City employee training on the system, for a handover period of six months running from 1 July 2015 to 31 December 2015. The CoT will acquire the smart meter system by the end of this handover period.
During this time, TUMS has also agreed that it will reduce its management fee from 19,5 cents to 9,5 cents for every R1 vended through the system in view of the CoT intention to purchase the system. The difference between the original service fee and it is envisaged that the reduced service fee will be held in some escrow account for the benefit of the CoT and subject to fulfilment of the terms and conditions of the termination agreement. This commitment from TUMS will facilitate a smooth handover of the smart meter project to the CoT and will help ensure that customers experience a smooth transition.
Corrupt Tshwane contract will cost Pretoria residents an additional R400 million
The agreement concerning the prepaid electricity metres between the Tshwane Metro and PEU Capital will cost Pretoria residents an estimated additional R400-million. This was the crux of today's media conference about the settlement agreement between Tshwane and PEU.
A transfer period of six months, during which an additional commission of 9.5% will be paid to PEU Capital, will amount to about R400-million.
This amount is additional to the more than R800-million that has already been wasted by the contract. The legal team of AfriBusiness has already requested the settlement agreement for investigation purposes. The Mayor of Tshwane, Kgosientso Ramokgopa, admitted that no tender process with regards to the electricity metres was followed before the appointment of PEU Capital. He further implied that the tender process was unnecessary, even though no legal reason could be supplied for the deviation of prescribed tender procedures.
"It is clear that Ramokgopa deems his administration as superior to municipal, provincial and national legislation," said Cornelius Jansen van Rensburg, CEO of AfriBusiness.
The City Council will roll out a new tender process within the next six months. PEU Capital will still be in control of all administrative processes until the successful tenderer bought over the remaining 14 000 electricity meters from the company. Despite these decisions, suspicion exists that PEU will eventually simply be appointed yet again.
The existing contract comes to an end on 30 June 2015.
Further complications include the announcement by Jason Ngobeni, the municipal manager, that the municipality also has plans to place water supply on similar prepaid meters.