No holds barred in Eskom scramble

CEO of Eskom Brian Dames presenting their Perspective of Nuclear Build Program during the NUM's Nuclear Energy workshop, held in Midrand Gauteng. (170) Photo: Leon Nicholas

CEO of Eskom Brian Dames presenting their Perspective of Nuclear Build Program during the NUM's Nuclear Energy workshop, held in Midrand Gauteng. (170) Photo: Leon Nicholas

Published Mar 25, 2013

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Londiwe Buthelezi

 

Eskom, which has come under intense scrutiny lately as concerns mount about its ability to keep the lights on, has considered sacking key contractors at its Medupi and Kusile power plants due to sub-standard work and delays, according to chief executive Brian Dames.

Dames told Business Report on Friday that Eskom was mulling all its options relating to the two key contractors, Hitachi Power Africa and Alstom. Cancellation of their contracts was a possibility that the utility had considered if they failed to expedite the work and ensure that quality standards and time frames were met.

“I can assure you we have considered [cancelling their contracts]. I asked my team 18 months ago when we had issues with structural steel from Hitachi that we look at other options. None of the options are being excluded,” said Dames.

But with a deadline of year-end for Medupi’s first unit to feed power into the national grid, it would be difficult to start from scratch in the commissioning of new contractors.

Kusile’s construction, on the other hand, was not as advanced, so there was still scope for changing contractors.

The two companies that were awarded the biggest contracts at Medupi have been at the centre of delays in the projects. Recent reports about defective welding in the boilers manufactured by Hitachi and Alstom’s request for additional time to complete its work have elevated fears that the December deadline could be missed, despite Eskom insisting it has the situation under control.

Dames said he had written confirmation from the two companies that their challenges would not affect Eskom’s deadline, but having had such confirmation before, he had invited the companies’ foreign management to South Africa and they would be on site to work with their teams.

“They have committed their best resources, and will not spare any cost, whether it’s people or otherwise,” he said.

Hitachi Power Africa, a consortium led by Japan’s Hitachi whose members include ANC investment arm Chancellor House, won the R20 billion tender to provide boilers in 2007. France’s Alstom was awarded the R13bn turbine contract.

Dames said Eskom would pay the companies only for what they delivered. On top of penalties, Eskom had performance bonds that parent companies had to post.

“What is important is delivery. We must hold companies to contractual performance. One [other] remedy is finding someone else,” Dames said.

Responding to criticism that it was Eskom’s specifications for Medupi that had created delays and problems, Dames said there was nothing wrong with the specifications.

“We operate one of the largest coal power station fleets in the world. Of course we know what we want. It’s not our fault a global multinational company can’t deliver.”

Dames said Medupi’s unit 6, the first one scheduled to come on stream, was 96 percent done. The unit would contribute 800 megawatts to the grid.

At the construction site, civil infrastructure was nearly complete, turbines had been fitted, three boilers were being installed and the coal stockyard had been prepared.

With severely constrained power supply exacerbated by labour unrest at two Eskom coal suppliers, Exxaro Resources and Shanduka Coal, as well as an increase in unplanned outages this month, the urgency for Medupi to come on stream has been renewed.

Last week Eskom had a buffer of just more than 1 percent between Monday’s peak demand and available supply.

But Dames said the country was in a totally different situation than in 2008, when the utility scheduled rolling blackouts.

“In 2008 we had 12 days of coal and now we have 48 days. The system is tight but only over that peak period.

“We have a clear protocol. Our resolve is to not ever go back to where we were in 2008,” Dames said.

The company has been managing its coal stockpiles by reducing coal burn during the day and increasing it in the evenings.

Dames said Eskom would have liked to take all its power plants down to do maintenance. The utility needed to shut 23 units for maintenance. A number of these required inspection while others needed their ash plants to be corrected or boiler tube leaks to be repaired.

“This winter there will be four or five outages. Unlike other winters, we will be doing critical maintenance. We really need to be fixing equipment and doing inspection work.”

Dames dismissed reports about his possible departure as Eskom chief executive, saying he was too busy to think of anything but the work at hand.

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