The poor execution of major projects, along with cost escalations and schedule slippages at a time when South Africa desperately needed additional capacity, call into question the capability of some of the contractors and Eskom’s responsiveness to the problems the utility had flagged.
Eskom has laid the blame for the delay of its Medupi power station in Lephalale, Limpopo, partly at the door of the contractors.
“Specialised welding on the boiler was of poor quality, the failure of some control and instrumentation factory acceptance tests and substantially lower than anticipated productivity resulted in both cost and schedule movements,” Eskom said.
Business Report has seen a 2013 PricewaterhouseCoopers (PwC) report on welding defects at the Medupi power station. The welding problems saw Eskom issue a stop work order at the power station in March 2012.
The report partly lifts the lid on the circumstances which led to the delay in the commissioning of the power station’s first unit, Unit 6. According to Eskom, the initial synchronisation of the unit was November 2012. But the unit started feeding power into the grid only in March last year.
The report also shows that Eskom took long to resolve problems it had identified with the boiler contract. For instance, when the PwC report was finalised in April 2013, the non-compliance report which Eskom had issued had been unresolved for three years.
“Eskom recognised from the beginning of the new-build programme that there were insufficient competent engineering practitioners to execute Medupi and Kusile return-to-service units and gas projects at the same time. A strategy was formulated to contract-in large and multinational engineering companies to assist Eskom.
However, the roles and responsibilities were not ideally defined. As a result, the decision-making and processes to be followed sometimes took too long, and in some cases resulted in the duplication of effort,” Eskom said.
As far back as January 2009, there were problems with Medupi’s boiler contract, which was executed by Hitachi Power Africa, a company whose participation in Eskom projects raised controversy because of its close links to the ANC’s investment arm, Chancellor House.
In March 2012, Eskom brought in an external assessor, Werner Kessel, to conduct a site visit at Medupi to establish the amount of work and schedule time it would take to achieve a boiler pressure test at Unit 6 in May 2012. Among others, the boiler test was meant to determine the integrity of welds. Kessel said that the May 2012 deadline was not achievable.
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Eskom rejected Hitachi’s proposal to weld at own risk after the issuance of the stop work order. Kessel had told Eskom that to weld at risk was against the law and was “unacceptable". But Hitachi defied the order and proceeded to weld between April 27 and May 4, 2012.
“The welding procedures could not be adequately qualified while the contractor continued to work 'on their risks' in their fabrication workshop.” Eskom said it could not agree to Hitachi’s proposal to conduct the welding, although the company assumed the risk for any Weld Procedure Qualification Record failures.
“Eskom could not take the risk of equipment being installed on site, without adequate evidence of compliance to the health and safety standards, therefore Eskom issued a stop work order because the risk was now transferred on to site by erecting non-compliant equipment,” Eskom said.
Explaining the delays in the commissioning of Medupi, Eskom said last week that the initial assumption that its contractors had the necessary knowledge and skills to execute mega projects in South Africa environment to supplement Eskom “did not prove valid".
Eskom said using the Majuba power station design as a proxy for Medupi was “not optimal". But it said the move was necessary to fast-track the project. “A truly turnkey approach was not an option at that time,” Eskom said.
In response to Business Report’s specific questions about the Medupi contract, Hitachi said: “In all mega projects there are cycles of testing and approval to achieve international standards. South African industry required particular attention to arrive at the standards for Medupi.”