Consultants to get Medupi on track

11 July 2013

South African Public Enterprises Minister Malusi Gigaba, saying he was “extremely disturbed” by further delays to the completion of Eskom’s Medupi coal-fired power station, has brought in independent consultants to get the state company’s build programme running efficiently.

Speaking at the release of Eskom’s annual results in Johannesburg on Wednesday, Gigaba said the government had prioritised South Africa’s infrastructure programme as the key driver of job creation, skills development and the industrialisation of the economy.

“The importance of delivering on capacity expansion projects to increase overall Eskom generating capacity cannot be understated. I’m extremely disturbed by these further delays being experienced.”

Consultants’ brief ‘broader than Medupi’

Gigaba said the Department of Public Enterprises had commissioned independent consultants to look at Eskom’s project management capabilities and assess the risks and cost escalations of the state company’s build programme.

The scope of the consultants’ task was “broader than Medupi,” encompassing Eskom’s entire build programme, he said.

The results of their study, expected in two months’ time, would help Eskom and the government to craft a way forward, Gigaba said, adding that the revised date for Medupi’s first power delivery “puts pressure” on South Africa’s already constrained electricity supply.

Eskom announced on Monday that the first unit of the Medupi station was unlikely to deliver first power by the December 2013 delivery date, but was only likely to do so in the second half of 2014, due to technical as well as labour issues.

Govt, Eskom to meet with contractors

Medupi, one of the two large coal-fired stations that Eskom is building, is a 4 764 MW coal-fired power station located near Lephalale. It will the first South African power station to have “super-critical” technology, and one of the world’s largest dry cooled stations, so it will much more efficient than older coal-fired stations.

The other station, Kusile, is located in Mpumalanga province and will have the same technology but with the addition of flue-gas desulphurisation, a state-of-the art technology used to remove oxides of sulphur from the exhaust flue gases in power plants that burn coal or oil.

Department of Public Enterprises Director-General Tseliso Matona and senior Eskom officials are to meet with Alstom – one of the major contractors at Medupi – in France in order to discuss the events of the Limpopo plant. The other major contractor is Hitachi.

Gigaba on Wednesday expressed support for Eskom’s possible penalising of non-performing contractors, but added: “This doesn’t preclude other remedial actions. It is important to be forward thinking. The study will inform corrective action. We should not make rash decisions that could impact the build programme.”

Profit ‘to be reinvested in the business’

Eskom reported group revenue of R128.9-billion for the financial year ended 31 March 2013, up from R114.8-billion in 2012, an increase of 12.2%.

Eskom said the results reflected the impact of the 16% tariff increase granted by the National Energy Regulator of SA (Nersa) for 2012/13 and declining demand for electricity due to lower economic growth and industrial unrest.

The utility said revenue growth had been offset by escalating operating expenditures, mainly due to an increase in primary energy costs.

The utility’s net profit decreased from R13.2-billion in 2011-12 to R5.2-billion in 2012-13.

The profits would be reinvested in the business, chief executive officer Brian Dames told Wednesday’s briefing, noting that Nersa’s decision to limit Eskom’s tariff increases would require new thinking from Eskom.

The company had been able to keep the lights on, despite it being a tough year, he said, with Eskom for the first time conducting maintenance work at its plants over the winter period.

SAinfo reporter