[miningmx.com] – ESKOM said completion of the first boiler at its Medupi power station would be delayed by six months as labour and contractor problems that have hamstrung the installation proved too much to overcome.
The delay would result in the capital cost of the power station ballooning about 15% to R105bn. The sum excludes interest during construction, transmission costs and claims that Eskom intended to make against contractors which it today squarely blamed for Medupi’s delays.
“The target date of December 2013 is unlikely to be achieved. A more realistic target date for first power from unit 6 is the second half of 2014,” said Brian Dames, CEO of Eskom. He estimated there would be a 700MW gap in non-base load supply owing to the delay. Consumers should not expect tariffs to be adjusted.
“We will fund the increase in cost from current capital allocations. We are comfortable with doing that,” said Dames. Some 3,800MW was expected to be online by 2015. Medupi is being built to produce 4,764MW of power.
The key delay at Medupi is the completion of the control and instrumentation (C&I) package which is being installed by French company, Alstom. “Today, we still don’t have operational C&I system. We don’t have the brains behind the power plant, said Paul O’Flaherty, Eskom CFO. “We continue to work with manufacturer. We have engineers in France going through each of the defects of system,” he said.
O’Flaherty laid into contractors blaming them for failing to employees with skills and not supervising them properly. “The ability of our contractors to supervise labour has been poor across the board. They have to adequately train the person to do the job and supervise them,” he said.
“Supervision of labour is not Eskom’s responsibility. Without Eskom playing a leadership role we’re just not getting the job done. Our appeal to labour is to get the full production out and contractors need to come to the party,” he said.
Eskom said it would address the question as to whether O’Flaherty had been persuaded to renew or extend his contract at Eskom. “We will be very definitive around issue on Paul. Will deal with it on Wednesday,” said Dames referring to the presentation of the utility’s full-year results.
KUSILE
Eskom also raised the prospect of potential delays at its next in line power station, the R118.5bn Kusile project which is being designed to add 4,800MW to baseload power capacity.
O’Flaherty alluded to Kusile having the same boiler problems encountered by Medupi, and that Eskom had asked the contractor – Hitachi – to deal with the issues. “We are still working on 2014 [2015 financial year] for the first 800MW to come on line from Kusile,” O’Flaherty said.
There were no specific plans to replace Hitachi as a contractor, but O’Flaherty said it was “… exploring alternative supplier arrangements”.
Eskom had put a commercial strategy in place to claim back costs from the contractors, but Dames raised the prospect that any compensation would not be delivered for years to come and only after a long legal struggle.
“This will take a long time to work through recovery. We need to finish building the station. We will be engaged in very tough legal issues for years to come. These are massive contractual issues,” he said.
