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Eskom puts Kusile contracts on hold

Sapa | Thu, 19 Nov 2009 13:32
[miningmx.com] -- Delays in signing some contracts for South African power utility Eskom's 4,800 MW Kusile power plant will result in the coal-fired station being commissioned later than the original 2013 start date.

Spokesman Andrew Etzinger said the utility had signed contracts for the boilers, turbines and civil works at the plant, but would delay smaller works until the outcome of its tariff rise application expected in February next year.

"We've committed two-thirds of the cost for Kusile ... the remaining third, we won't be placing those contracts until the outcome of the tariff increase application ... in terms of our cashflow we believe that it would be prudent to do that," he told Reuters.

"It will result in a delay."

Etzinger said it was too early to say how long the actual start-up date of the plant would be postponed.

"The delay would be commensurate with the length of time that the projects are on hold ... it would not necessarily be significant," he said.

Kusile and another 4,800 MW power plant Medupi, are Eskom's first new base-load power plants in more than two decades.

Medupi's first unit is on track to be commissioned by April 2012, while the first part of Kusile was planned to be brought on stream in early 2013.

The South African utility has been rationing electricity since early last year when the national grid nearly collapsed forcing mines and smelters to shut for days and costing the biggest economy on the continent billions of dollars.

Eskom has launched an ambitious expansion programme but still needs to raise parts of the 385 billion rand ($51.13 billion) required to supply fast-rising demand in the country. Etzinger said the system continued to be tight, but the utility does not foresee load shedding -- a term used for blackouts -- in 2010.

"We are under pressure not to run the expensive open cycle gas turbines ... therefore we say that the system is tight."

He said the utility has not yet made a decision on whether the next power plant, after Medupi and Kusile, would be another coal-fired station or a nuclear facility.

For now both options are being considered, but if Eskom decided to go for nuclear, also to reduce its carbon footprint, it would need to make that decision next year to make sure the plant could help fill a supply gap around 2019.

If the utility decides to go for a third coal station instead, it could wait for another 12-18 months to make the commitment, he said.

Eskom is struggling to raise all the funds it needs to pay for its power expansion programme.

South Africa is looking at ways to help Eskom bridge its funding gap without having to rely on a requested annual 45 percent rise in power tariffs for the next three years, eyeing additional sources from within its budget or external support.

The government said it might also consider a partial privatisation for the utility to relieve its balance sheet, which led to a 9.7 billion rand loss in the year to end-March.

"It's complete speculation to say whether or not the delays at Kusile will continue beyond the outcome of the tariff increase application to Nersa," Etzinger said.

Kusile power station, situated at Emalahleni in Mpumalanga, had been expected to satisfy 10 percent of the country's electricity demand.

The power station would reportedly cost around R120bn to complete. Eskom has stated previously that the first unit of Kusile was expected to be completed by 2013 and would deliver 4,800 megawatts.