Johannesburg - Besides the financial results themselves for Eskom’s financial year ending March 31, perhaps the most important new information to come out at the media briefing at Megawatt Park on July 5 was Eskom’s latest estimate of the overnight capital costs, or cost to completion (CTC), for its Medupi and Kusile power stations.
The 4764 MW Medupi coal-fired power station, situated near Lephalale in Limpopo province, has been under construction since 2007.
The 4800 MW Kusile coal-fired power station close to Kendal power station in the Nkangala district of Mpumalanga province, has been under construction since 2008.
Page 141 of Eskom’s 2015/16 integrated annual financial report indicates that:
The latest estimated CTC for Medupi, excluding flue gas desulphurisation plant (FGD), and excluding interest during construction (IDC), had increased from R105 billion to R145 billion, with capitalised IDC increased to R43.7 billion.
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The latest estimated CTC, for Kusile, including FGD, but excluding IDC, had increased from R118.5 billion to R161.4-billion, with capitalised IDC not yet disclosed.
However, in light of the significantly increased capital costs and delayed project programmes for both Medupi and Kusile, and based in the increase in IDC at Medupi, it is expected that the capitalised IDC for Kusile could increase by about 50 percent above the figure previously indicated by Eskom in September 2014.
It should be noted that although a FGD plant was not initially included in the costing of Medupi, the site has been designed to be ready to install a FGD plant at the first major shutdown of each unit after construction. Furthermore, FGD plant is required at both Medupi and Kusile in the conditions of a $3.75-billion World Bank loan to Eskom, approved in April 2010.
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Kusile, on the other hand, is being constructed to include a FGD plant from the start.
The history of the estimated CTC approved by the Eskom board from time-to-time and communicated to the public for the construction of Medupi is as follows:
Apr 2007: R69.1 billion: Initial CTC for 6 units excluding FGD and IDC
Sep 2008: R88.5 billion
Sep 2009: R87.5 billion
Jun 2011: R91.2 billion
May 2013: R105 billion
July 2016: R145 billion: Latest CTC excluding FGD and IDC
Similarly the CTC approved by the Eskom board for the construction of Kusile is as follows:
Apr 2007: R80.6 billion: Initial CTC including FGD and excluding IDC
May 2013: R118 5 billion:
July 2016: R161 4 billion: Latest CTC including FGD and excluding IDC
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As a result, the massive cost and time overruns at Eskom’s Medupi and Kusile power stations are expected to further strain Eskom’s financial resources, and place upward pressure on Eskom’s electricity price trajectory in the years ahead.
This article first appeared on ee.co.za
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