Material progress had been made in dealing with the cashflow and project delivery uncertainties that afflicted the initial stages of Eskom’s R450-billion investment programme, CFO Paul O’Flaherty said on Friday.

Speaking during a Medupi site visit on Friday, he told Engineering News Online that the group was in a position to invest at a yearly tempo of R65-billion for the remainder of the current build phase, which involved the addition of 17 120 MW and 4 700 km of transmission lines between 2004 and 2018 – to date, about 6 000 MW had been installed.

During its previous two financial years, the utility had failed to meet its capital expenditure (capex) targets, underinvesting against the budget by a massive R25.1-billion in 2010/11.

The group spent capex of R44.3-billion last year, which was well short on its capex budget of nearly R70-billion. In 2009/10, the utility also fell short of target, spending R57-billion.

O’Flaherty said it now had a far better grasp of its capacity to spend and that the target of R75-billion for 2011/12 had, thus, been revised down to around R60-billion.

But Eskom was also now convinced of its ability to spend at the R65-billion-a-year level for the remainder of the build period.

At its key Medupi site, contractors had also “clawed back” some time on the delivery scheduled for the first units, which is under construction near Lephalale, in Limpopo. However, Eskom was still officially sticking with its previously announced deadline for first power of December 2013.

O’Flaherty praised the efforts of Hitachi Power, in particular, which had been critical to the progress that had been made. He said the design changes, together with the intervention of structural steel specialists, had given Eskom the confidence that the unit would definitely be fully operational during the second half of 2013.

The lessons learned would be transferred to the other five units, as well as to the boilers being constructed at the Kusile site, in Mpumalanga.

It had also made progress in resolving scope and payment issues with Murray & Roberts (M&R), which was performing civil works on site and had also been contracted by Hitachi to perform mechanical works on the boiler facilities.

M&R CE Henry Laas, who was also on site on Friday, told Engineering News Online that the project had been “derisked” and that it could no longer be considered a “problem” contract for the JSE-listed group.

ZUMA VISITS MEDUPI

President Jacob Zuma visited Eskom's Medupi project site on June 8 to witness part of a hydrostatic pressure test for the first boiler unit at the facility, which was being developed into a six-unit, coal-fired power station, with a nameplate capacity of 4 764 MW.
 
The tests, which effectively involve pushing water through the boiler components at various pressures, are an important milestone in the construction of the R91-billion facility (R120-billion if interest is included).

They are also a statutory requirement and are being monitored and audited by an independent inspection authority. 

Integration of the boiler with the turbine, to be supplied by Alstom would follow, and commissioning of the 794-MW first unit, or Unit 6, was likely to begin in the first half of 2013.

The subsequent five units were scheduled to be commissioned in eight-month intervals following the introduction of the first unit. First power from the last of the six units is expected in May 2017. 


Besides the pressure test, Unit 5 civil works are advancing and preparations are under way to take delivery of first coal on June 15. 
Once complete, Medupi would be the world's fourth-largest coal-fired power station.

It is being funding, in part, by a $3.75-billion World Bank loan. The balance of the funding was being raised from a combination of internal resources and debt.

The R300-billion funding plan, which was 78% finalised, was being raised off the strength of the utility’s balance sheet, which had been strengthened by a R20-billion injection from government, Eskom's sole shareholder, as well as a R60-billion subordinated loan from the National Treasury.


Between 2012 and 2018 11 000 MW still needs to be added, primarily from Medupi, as well as the Kusile coal-fired project being constructed in Mpumalanga and the Ingula pumped-storage scheme under way in the Drakensberg.