Pravin Gordhan (L). Picture: MIKE HUTCHINGS
Pravin Gordhan (L). Picture: MIKE HUTCHINGS

Cabinet has mandated public enterprises minister Pravin Gordan to produce a comprehensive recovery plan for Eskom’s Medupi and Kusile power stations.

The plan will include a re-assessment of the key cost drivers and time over-runs for the new-build project, which has been plagued by design faults and underperformance, ultimately contributing to the country’s electricity shortage and load-shedding.

The Cabinet said in a statement on Thursday after its meeting the day before, that it remains concerned about the performance of the two power stations, which are projected to generate 4,800MW each.

The Medupi power station has been plagued by cost and time over-runs as well as design and technical problems and is way behind in its construction schedule and way in excess of its budget. The first sod for Medupi was turned in 2007 when its cost was estimated at R69bn and the completion date estimated by 2015. The cost is now estimated at more than R145bn and all six units are only expected to be completed in 2020/2021.

The three completed units of Medupi have experienced frequent breakdowns and produce only 50% of the electricity they should. Eskom has informed the National Energy Regulator of SA (Nersa) of seven serious design faults at Medupi. 

The state-owned power utility has assembled teams of specialists to rectify the major defects at the power stations and technical workstreams have been established with contractors.

The Cabinet received a report from deputy president David Mabuza on the work of the joint special cabinet committee on Eskom, established in response to recent electricity supply disruptions and their negative impact on the economy. 

“The government’s co-ordinated efforts to bring financial, operational and structural sustainability to Eskom are proceeding in earnest,” the Cabinet statement said. It noted that the Eskom technical review team appointed by Gordhan and the Eskom board started its work this week and is expected to produce a preliminary report within four weeks.

Load-shedding

“The performance of the power plants remains volatile even though load-shedding has not been implemented since February 15 2019 [however, load-shedding has been scheduled for Thursday March 14]. There has been a number of major incidents in the distribution areas that have contributed to the power disruptions,” the statement said.

The Cabinet noted the good progress that has been made with the recovery of coal stocks across the power stations, but said further attention has to be given to the coal supply chain.

Eskom, which supplies more than 95% of SA’s electricity, previously said the main problems at Medupi and Kusile lay at the door of the main contractor for the boilers, Japanese conglomerate Mitsubishi Hitachi Power Systems Africa. 

In 2013, 10,000 welding faults were discovered when Hitachi failed to heat-treat the welds. In 2015, it failed the crucial steam test, which is a necessary step before commissioning. In 2015, Hitachi and Mitsubishi Heavy Industries merged their power activities to form Hitachi Power Systems Africa.

Hitachi being awarded to build the boilers was controversial due to its partnership with the ANC’s investment company, Chancellor House. In 2015, Hitachi was fined by the US Securities Exchange Commission (SEC) for allegedly paying the ANC investment front a $1m success fee and $5m in “dividends” in connection with the Medupi and Kusile contracts.

with Carol Paton

ensorl@businesslive.co.za

Pravin Gordhan has been tasked with saving Medupi and Kusile power stations.