…as it claims firm abandoned World Bank-funded project after receiving millions
Moorosi Tsiane
THE Ministry of Energy and Mining has taken legal action against Phaks Joint Venture (JV), seeking to recover more than M15.4 million which it alleges was improperly paid to the contractor before it abandoned the World Bank-funded Ha Belo power station project.
In papers filed in the High Court, the ministry accuses the Phaks JV of failing to complete the Ha Belo 33/11kV Substation and Transmission Line Project despite receiving millions of maloti in contract payments, duplicate claims and supplier settlements.
The ministry argues that Phaks JV was unjustly enriched at the expense of taxpayers after failing to complete the project, forcing the government to terminate the contract and appoint a new contractor to finish the remaining works.
It is also asking the court to declare that the joint venture ceased to exist after one of its members withdrew and the contract automatically terminated.
Cited as respondents are Phaks Joint Venture, consortium members; Phaks Electrical and Construction (Pty) Ltd, TM2 Construction and Civil (Pty) Ltd, and One Power Projects (Pty) Ltd.
According to the application, the government had no option but to institute legal proceedings after terminating the contract and engaging another company to complete the stalled project.
In his founding affidavit, Lesotho Renewable Energy and Energy Access Project (LREEAP), Engineer Seema Mofubetsoana, says the joint venture was established solely to bid for and execute the Ha Belo electricity infrastructure project under the World Bank-sponsored LREEAP.
“The Joint Venture was established exclusively for the submission of a tender proposal and the execution of all services and works relating to the design and construction of the Ha Belo 33/11kV Substation and the 33/11kV Transmission Line.
“The agreement clearly stipulated the responsibilities of each partner, and its continued existence depended entirely on the execution of the contract awarded by the Ministry.”
Mr Mofubetsoana says under the JV arrangement, Phaks Electrical and Construction was responsible for 30 percent of the works, TM2 Construction and Civil 40 percent, while One Power Projects was allocated the remaining 30 percent, including the design and installation of the substation.
The agreement also provided that the partnership would automatically terminate if the ministry cancelled the procurement process or awarded the contract to another bidder.
According to the affidavit, the ministry awarded the contract to Phaks JV in August 2021 at an initial value of M86 619 799.21.
The project covered the design, manufacture, procurement, construction, installation and commissioning of the Ha Belo substation and associated transmission lines, with the contractor also responsible for engineering supervision, labour, materials, equipment, spare parts and accessories.
The ministry’s role, Mr Mofubetsoana says, was limited to procuring and transporting the main plant equipment to the construction site.
“The responsibility to design, manufacture, procure, subcontract, install and complete the facilities rested entirely with Phaks under the contract.”
He adds that the joint venture agreement prohibited any changes to its membership without the ministry’s prior written approval.
Construction began in November 2021 and was scheduled for completion within 18 months, by April 2023. However, repeated delays resulted in several extensions, with the final extension running from October 2024 to January 2025.
Mr Mofubetsoana alleges the project suffered a major setback when One Power Projects abandoned the joint venture only months after the contract was signed.
“Sometime between October 2021 and March 2022, One Power Projects vacated, left and abandoned the Joint Venture and never again participated in the execution of the contract.
“The withdrawal of one of the essential partners fundamentally affected the Joint Venture and undermined its ability to fulfil the contractual obligations it had undertaken.”
He argues that the departure of One Power Projects destroyed the very basis upon which the consortium had been established.
“The Joint Venture’s purpose and substratum disappeared. The core objective for which it had been established no longer existed, particularly after the Ministry subsequently terminated the construction contract.”
According to Mr Mofubetsoana, persistent failures by the contractor ultimately prompted the ministry to terminate the agreement on 25 August 2025 under Clause 42 of the contract.
A fresh tender was advertised in February 2026, with LSP Construction subsequently appointed to complete the outstanding works.
“The project is currently being completed by another contractor following the lawful termination of the contract with Phaks Joint Venture.”
Despite receiving substantial payments, Mr Mofubetsoana alleges that Phaks failed to procure essential equipment and complete the project.
He says several suppliers withheld critical equipment because Phaks had failed to settle their invoices despite already receiving payment from the ministry.
“Although the Ministry had made payment remittances under the contract, Phaks failed to settle its suppliers in full and failed to deliver the essential equipment required for implementation of the project. As a consequence, several suppliers refused to release the equipment.”
To rescue the project, the ministry entered into settlement agreements with Phaks between March and April 2025, under which it paid suppliers directly, including ACTOM Power Transformers, ACTOM High Voltage, CIS Engineering and Henan Qingzhou Cable.
The government says it paid M4 860 740.39 towards outstanding supplier balances, shipping, clearing, transport and off-loading costs on the understanding that Phaks or its nominated assignee would complete the remaining works.
“The Ministry discharged obligations that properly belonged to Phaks. These payments were made solely to rescue the project and facilitate completion.
“Despite these extraordinary measures, the remaining balance of works was never completed by Phaks, its agents or its cessionary.”
The ministry is now seeking reimbursement of that amount.
Mr Mofubetsoana further alleges that Phaks received M1 955 040.45 in VAT overpayments after allegedly charging VAT twice on extension costs and technical variation payments that were already VAT inclusive.
“There was no lawful basis upon which these additional VAT payments were due. The payments were made through error and should never have been received by Phaks.”
The ministry is also seeking repayment of M5 457 400, which it says was mistakenly paid twice for the substation design.
According to Mr Mofubetsoana, the contractor was fully paid for the design in May 2022, but the same amount was allegedly paid again between May and December 2022.
“The duplicate payment was made through error and oversight. The amount had already been paid in full and no further payment was due.”
The application further alleges that Phaks received M474 529.10 to procure recommended spare parts but neither purchased nor delivered them.
“It was clearly understood that these funds would be used to purchase the recommended spare parts from suppliers and deliver them to the project site. Notwithstanding receipt of the money, Phaks neither procured the spare parts nor delivered them.”
The ministry is also claiming M2 695 313.61, paid towards storage costs and price adjustments relating to ACTOM High Voltage and ACTOM Power Transformers.
According to Mr Mofubetsoana, the payments were intended to secure the release of equipment needed for the project, but that objective was never achieved.
“The payments were made specifically to facilitate the release of equipment required for implementation of the project.
“The Ministry did everything within its power to ensure continuation of the works, but the contractor ultimately failed to perform.”
He says the disputed payments total M15 443 023.55.
“The respondents have been unjustly enriched in the total amount of M15 443 023.55. The Ministry has suffered impoverishment in exactly the same amount.
“The enrichment occurred directly at the expense of the Ministry and there exists no lawful justification for the respondents to retain these monies.”
He adds that repeated demands for repayment have been ignored.
The ministry is therefore asking the High Court to declare that the joint venture was dissolved by operation of law or, alternatively, to order its dissolution.
It also seeks an order compelling the respondents, jointly and severally, to repay M15 443 023.55, made up of M4 860 740.39 paid directly to suppliers and logistics providers, M1 955 040.45 in VAT overpayments, M5 457 400 in duplicate design payments, M474 529.10 for undelivered spare parts, and M2 695 313.61 in storage costs and price adjustments.
The ministry is further seeking interest at 10.25 percent per annum and costs of suit.
Background
The Ministry of Energy had awarded Phaks JV the contract for the construction of the Ha Belo 33/11kV Substation and associated 33kV transmission lines on 18 August 2021. The project was expected to be completed within 18 months.
Work commenced in November 2021 and was scheduled for completion by April 2023 at an initial cost of M86.6 million. However,
repeated delays and cost overruns pushed the project’s value to
M121.6 million, while the works remained unfinished.
The project comprises three main components: the construction of transmission lines from Ha Mopeli to Ha Belo and from Hlotse to Ha Belo, as well as the development of a power substation at the Ha Belo industrial site.
The project has, however, been dogged by allegations of corruption and mismanagement, amid claims that substantial sums were paid to the contractor despite limited progress on the ground.
In June 2025, the government refunded M22 million to the World Bank after failing to account for funds allocated to the project.
The scandal eventually led to criminal charges against former Energy Principal Secretary Themba Sopeng and several co-accused. Prosecutors allege that Mr Sopeng abused his position as chief accounting officer by facilitating the award of the contract to Phaks JV in violation of procurement regulations.
Mr Sopeng, together with Binare Ramochele, Mookho Pule, Mathapelo Silase, Neo Lekhotla, Motsekuoa Phalole, Teboho Mokhethi, Makhabane Leluma, Mojaki Lesenyeho and representatives of Phaks JV, faces charges including corruption, money laundering and embezzlement.
As costs continued to escalate, Prime Minister Sam Matekane announced in June last year that an additional M50 million would be required to complete the project.
The Ministry of Energy subsequently terminated Phaks JV’s contract, accusing the contractor of failing to deliver the project despite costs having ballooned from the original M86.6 million to nearly M170 million.
The termination of Phaks JV’s contract triggered a legal battle after the company disputed the government’s decision and insisted it remained contractually entitled to continue with the works.
The government subsequently approached the courts seeking confirmation of the termination. While the High Court’s Northern Division initially declined to hear the matter, ruling that arbitration should be pursued first, the Court of Appeal overturned that decision in June, and upheld the government’s right to terminate the contract.
