Eskom in power setback as Medupi project delayed

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Eskom-logoElectricity challenges and delays in delivering power stations seem not to be the problem only in Botswana and Botswana Power Corporation will be relieved to know that its counterpart in South Africa, Eskom is also been let down by contractors to deliver its own mega projects on time.

Eskom, which has over the years been supplying electricity to BPC, has revealed that Medupi, the MW coal-fired power station near Lephalale in Limpopo province will not be delivered on time.

The South Africa’s state owned power utility says the build programme, which includes Medupi, has faced challenges since inception, but significant progress has been made blaming labour unrest and under-performance by key contractors which put the timelines at the project in question.

It revealed that Unit 6, which is the first of Medupi’s six 800 MW units, was due to deliver first power to the grid by the end of 2013. “However, Eskom earlier communicated that critical technical challenges need to be resolved in order for Unit 6 to begin producing power. These technical challenges relate to the welding on the boilers and the control and instrumentation systems for the units. In addition are the ongoing labour challenges,” Eskom said.

“All of us on site are now focused on delivering the power station, on time, on budget, safely and to the required quality standards,” added Eskom Finance Director and head of Group Capital Paul O’ Flaherty.

Eskom said it has engaged with the global leadership of Hitachi and Alstom to resolve the technical issues on the boiler and control and instrumentation contracts. Eskom has confirmed that the December 2013 target date is unlikely to be met.

“A more realistic target for the first synchronisation of Unit 6 to the grid is the second half of 2014. This 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 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 Chief Executive Brian Dames added that they have done everything in their power to meet the December target date.

“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,” he said.

Eskom noted that a revised outlook indicates that there could be a potential gap in supply in 2014, with the most likely scenario being a gap of in the region of 700 MW. The two new large coal-fired stations which Eskom is currently building, Medupi and Kusile, and the new pump storage scheme, Ingula, will together add a further 10 896 MW to the national grid, expanding

As a result of the longer than expected construction time, the cost to completion of Medupi is now expected to increase 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 will be funded from existing capex allocations and will not impact electricity tariffs. The cost of Medupi remains within international benchmarks.

“The power system will remain tight, as we have said, but demand for electricity has been muted because of slower than expected economic growth, and we are working to put  initiatives in place to close the gap,” added Dames.

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