[miningmx.com] — THE anticipated slowdown in South Africa’s economic growth may be the critical factor that will again save Eskom’s bacon in its efforts to “keep the lights on”.
This follows the news that the commissioning of the first generating set at the Medupi power station in the Waterberg could be delayed yet again – this time because of delays on the construction of the boiler by contractors Hitachi.
The possible delay was revealed by Eskom CEO Brian Dames in a briefing to Parliament’s committee on public enterprises on Tuesday.
He told the committee that “with a year to go we are concerned that the performance of some contractors could put the schedule at risk”, pointing to Hitachi.
The global economic crunch of late 2008 and 2009 was the key factor in saving South Africa from widespread blackouts in the wake of the initial collapse of the Eskom grid in February 2008.
At this stage Eskom is not giving any specifics on the possible delay, or how it will affect construction of the rest of the power station.
Medupi is a “six pack” station consisting of six identical boiler units, each capable of generating 800MW of electricity.
Eskom said a more detailed timeline on Medupi would be provided when the utility releases its interim financial results on November 23.
FIRING LINE
Assuming there is a delay, then the economy stands directly in the firing line because the introduction of new generating capacity at Medupi is on the critical path to meet forecast for rising demand for power.
Also in the firing line has to be Exxaro Resources, which holds the contract to supply Medupi with coal over its anticipated 40 year life. The contract is for the supply of around 14.6 million tonnes (mt) annually once the power station has been completed.
Exxaro has already experienced one major delay in the expansion of its Grootegeluk colliery to supply Medupi, caused by revisions to the supply contract by Eskom.
The original supply contract called for the delivery of the first coal in the fourth quarter of 2011, with a ramp-up to full production by 2014 on the basis that the first generating set at Medupi would start-up in April 2012.
But, at the end of 2009, Eskom requested a review of the terms of the agreement, resulting in Exxaro temporarily suspending development of the Grootegeluk Medupi Expansion Project (GMEP).
At the time Exxaro finance director Wim de Klerk stated bluntly that the reason for the contract review was a six-month delay in Medupi’s construction schedule.
That was denied at the time by Dames, but the utility subsequently pushed back the Medupi start-up date “to the end of 2012”.
But that target may not be met because of the problems with Hitachi. Eskom spokesperson Hilary Joffe told Miningmx the utility was now taking “a conservative view” on when the first generating set might be commissioned.
In March 2010, Exxaro announced a revised supply agreement for Medupi which called for delivery of the first coal in May 2012, with full commissioning expected in 2014/15.
In the 2010 Exxaro annual report De Klerk said “the Medupi coal supply and offtake agreement became unconditional and binding on Exxaro and Eskom on 24, June 2010”.
Asked about the impact of any construction delay on the coal supply contract, Joffe said “as part of the detailed assessment we are conducting, we are looking at the contractual implications and reviewing our options”.
No comment was immediately available from Exxaro.
Asked what a delay at Medupi would do to Eskom’s “keep the lights on” campaign Joffe commented: “We are resolved to keep the lights on and are putting plans in place to ensure we can, in partnership with stakeholders.
“However, we are also revising our projections of the energy gap to take account that economic growth, and hence electricity demand growth, will be lower than we earlier expected.
“We are also assessing what the knock-on effect might be on the construction programme for the rest of Medupi. We will disclose a more detailed update when we release our interim results next month.’
