SA extends new power plant deadline

8 July 2013

South Africa’s new Medupi coal-fired power station, under construction in Limpopo province, is unlikely to deliver its first power to the country’s grid by the end of this year as planned, state power company Eskom confirmed on Monday.

Medupi’s unit 6, the first of Medupi’s six 800 MW units, was due to deliver its first power to the grid by December 2013. A more realistic target for the first synchronisation of unit 6 to the grid is the second half of 2014, Eskom said.

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 first in South Africa. Flue-gas desulphurisation is 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.

Labour unrest, contractor failures

Medupi has battled with labour unrest as well as under-performance by key contractors, putting the timelines of the project, which began in 2005, in question.

Eskom has been engaging with contractors Hitachi and Alstom to resolve critical technical issues regarding the welding on the station’s boilers and the control and instrumentation systems for its units.

Inadequate post-weld heat treatment had meant that multiple welds needed to be retested and fixed, while welds made using unqualified procedures needed replacement.

Eskom said on Monday that effective interventions had been put in place to address these issues while the progress of the repairs was being closely monitored.

“Some progress has also been made in resolving the control and instrumentation issue. However, there has been continued under-performance on the control and instrumentation contract, despite active interventions by Eskom over the past year, and it is now clear that the issues on the control and instrumentation for unit 6 will take time to resolve.”

Interventions to support revised target

The revised 2014 target is based on in-depth independent and internal assessments of the project which Eskom has undertaken.

“The revised schedule is based on certain assumptions and depends on the success of interventions to ensure [that] critical timelines on the boiler and control and instrumentation contracts are met in the next few months, as well as the stability of the labour force,” Eskom said.

Eskom’s board is closely monitoring the project, while senior executives are on site on a weekly basis. Additionally, the Eskom project team has been strengthened with specialist support.

A bi-monthly meeting has been set up between Eskom executives and the chief executives of all the major contractors, including a site walk, in order to resolve all the issues hampering progress.

Significant progress has been made to restore effective labour relations on site since March. In June, Eskom, the contractors and labour signed an innovative new “partnering agreement” which should bring stability.

“We have done everything in our power to meet the December target date,” Eskom CEO Brian Dames said in Monday’s statement. “However, it is now clear that the boiler and control and instrumentation issues cannot be resolved in time for the first unit of Medupi to deliver first power to the grid by 2013.

“We are communicating this pro-actively, in line with our commitment to keep South Africa informed on the progress of the build projects.”

Ensuring security of supply

The company is working to ensure South Africa’s security of supply despite the delay, with a revised outlook indicating that there could be a potential gap in supply in 2014 – the most likely scenario being a gap in the region of 700 MW.

“The power system will remain tight … and we are working to put initiatives in place to close the gap,” Dames said. “We remain determined to keep the lights on, with the help of all South Africans. This is being done with support from government.”

Once unit 6 is online, the remaining five units of Medupi will be brought online at intervals, so that the entire power station should be fully commissioned by 2017.

Meanwhile, the cost to complete Medupi has increased to a maximum of R105-billion (excluding interest during construction, transmission costs and claims against contractors), from the previous estimate of R91.2-billion.

The increase would be funded from existing capex allocations and would not affect electricity tariffs, the company said, adding that the cost remained within international benchmarks.

“We expect to get more than 3 800 MW of new capacity online by 2015, from Medupi, Kusile, Ingula and our Sere wind farm,” Eskom finance director Paul O’Flaherty said. “We have had the programmes and the costs independently reviewed.

“We are working very hard indeed to make sure that we deliver, and we have the commitment of the major contractors to achieve our goals.”