Eskom extends Medupi's power delivery date; costs up

"Unit 6, which is the first of Medupi's six 800MW units, was due to deliver first power to the grid by the end of 2013. In its update today, Eskom has confirmed that the December 2013 target date is unlikely to be met," said the parastatal.

A more realistic target for the first synchronisation of Unit 6 to the grid is the second half of 2014.

In its update on the progress of its new build programme, which began in 2005, Eskom said there have been several challenges.

Medupi, which is one of the two large coal fired stations that Eskom is building, also faced challenges including labour unrest and under-performance by key contractors, putting the timelines at the project in question.

Eskom earlier communicated that critical technical challenges needed 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.

Eskom has engaged with Hitachi and Alstom to resolve the technical issues on the boiler and control and instrumentation contracts.

The critical issues on the boiler related to inadequate post-weld heat treatment, which meant that multiple welds needed to be retested and fixed. Secondly, welds made using unqualified procedures needed replacement.

The parastatal said effective interventions have been put in place to address these issues while the progress of the repairs is being closely monitored and tracked.

"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."

The 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 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.

The Eskom 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 2013. In June, Eskom, the contractors and labour signed an innovative new Partnering Agreement, which sets the basis for an effective partnership and should bring stability.

"We have done everything in our 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," Eskom Chief Executive Officer Brian Dames said.

The power parastatal is working with stakeholders to ensure security of supply despite the delay, with a revised outlook indicating that there could be a potential gap in supply in 2014 -with the most likely scenario being a gap in the region of 700MW.

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

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.

Cost to complete Medupi increases

Meanwhile, the cost to complete Medupi has increased to a maximum of R105bn (excluding interest during construction, transmission costs and claims against contractors), from the previous estimate of R91.2bn.

The increase will be funded from existing capex allocations and will not impact electricity tariffs. The cost of Medupi remains within international benchmarks.

"We expect to get more than 3,800MW of new capacity online by 2015, from Medupi, Kusile, Ingula and our Sere wind farm. 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," Eskom Finance Director and Head of Group Capital, Paul O' Flaherty, said.

Medupi is a 4,764MW coal-fired power station located near Lephalale. It is the first South African power station to have super-critical technology, and is one of the world's largest dry cooled stations, so it will much more efficient than older coal fired stations.

The other coal fired station Kusile, is located in Mpumalanga province and has the same technology but with the addition of Flue-Gas Desulphurisation - a first in South Africa. FGD is the current state-of-the art technology used to remove oxides of sulphur from the exhaust flue gases in power plants that burn coal or oil.