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Industry news
Massive cost and time overruns at Medupi and Kusile power stations
by Chris Yelland, investigative editor, EE Publishers
Besides the financial results themselves for Eskom's financial year ending 31 March 2016, perhaps the most important new information to come out at the media briefing at Megawatt Park on 5 July 2016, was Eskom's latest estimate of the overnight capital costs, or cost to completion (CTC), for its Medupi and Kusile power stations.
Click here to read the full article
The massive cost overruns disclosed for Eskom's Medupi and Kusile power stations are expected further strain Eskom's financial resources, and place upward pressure on Eskom's electricity price trajectory in the years ahead.
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.
When questioned, Eskom's head of capital projects, Mr. Abram Masango, advised that:
- The latest estimated CTC for Medupi, excluding flue gas desulphurization plant (FGD), and excluding interest during construction (IDC), had increased from R105-billion to R135-billion.
- The latest estimated CTC, including FGD, but excluding IDC, had increased from R118,5-billion to R160-billion.
The latest estimated interest during construction has still not been disclosed by Eskom. However, in light of the significantly increased capital costs and delayed project programmes for both Medupi and Kusile (see below), it is expected that IDC for both Medupi and Kusile could increase by about 25% above the figures previously indicated by Eskom in September 2014.
It should be noted that although FGD plant was not initially included in the costing of Medupi, the site has been designed to be ready to install 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 US $3,75-billion World Bank loan to Eskom, approved in April 2010. Kusile, on the other hand, is being constructed to include 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: R69,1bn: Initial CTC for 6 units excluding FGD & IDC
- Sep 2008: R88,5bn
- Sep 2009: R87,5bn
- Jun 2011: R91,2bn
- May 2013: R105bn
- July 2016: R135-bn: Latest CTC excluding FGD & IDC
Similarly the CTC approved by the Eskom board for the construction of Kusile is as follows:
- Apr 2007: R80,6bn: Initial CTC including FGD & excluding IDC
- May 2013: R118,5bn
- July 2016: R160bn: Latest CTC including FGD & excluding IDC
An updated Total CTC as at July 2016 for Medupi and Kusile power stations, including IDC, FGD and the settling of unprocessed contractor claims, is estimated below... (more)
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Announcement
65th AMEU Convention 2016
The Emfuleni Local Municipality will be hosting the 65th Convention of
The Association of Municipal Electricity Utilities
of which most municipalities are members.
Eskom, electricity suppliers and international visitors are among the attendees of this highly interactive and informative convention and networking session.
The Convention will be held at Emerald Resort and Casino in Vanderbijlpark from Sunday, 2 October 2016 to Wednesday, 5 October 2016.
Over and above the formal convention proceedings, a programme of sporting events, social outings and entertainment is being arranged, together with a programme for the delegates' partners.
Click here for further information and registration to attend
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