Medupi struggles to come online

2014-07-20 15:00

The deadline for the first unit of Eskom’s Medupi plant to come online was December this year, with first steady output in April next year.

But last week, this appeared to have quietly moved to the end of June next year.

At last week’s results presentation for the year to March, the utility said Unit 6 of the R105?billion power station in Lephalale would deliver its first power to the grid by December, with full commercial operations expected “approximately” six months afterwards.

This differs from the April deadline provided last month.

Eskom has refused to explain the latest delay or make Dan Marokane, its acting group capital boss and the executive responsible for the Medupi project, available for interviews.

Its media team members said journalists were given ample opportunity to talk to executives at its results presentation. “Marokane and his team’s focus has shifted back to ensuring the delivery of Medupi’s Unit 6 by year end,” said the power utility.

Public Enterprises Minister Lynne Brown referred queries back to Eskom.

The presentation showed the initial delays, most of which surrounded the control and instrumentation package awarded to French multinational Alstom, were resolved.

Alstom’s boiler protection system, a part of the overall package, had failed factory acceptance tests and was awarded to German rival Siemens earlier this year.

The economy can ill-afford another two-month delay, economists told City Press.

FNB’s Alex Smith said it was not clear how much power would be generated from Unit 6 between December and July. But if most of the power came online in the middle of next year, the economic impact could be significant.

“This is because electricity consumption is generally highest in winter, so another winter without additional power would place immense pressure on the grid, possibly forcing Eskom to ask major consumers to reduce power demand,” he said.

He said further delays could bruise South Africa’s reputation?–?among locals and foreigners?–?as an investment destination as it would raise questions about government’s ability to meet its infrastructure deadlines.

The Bureau for Economic Research’s Hugo Pienaar said: “There seems to be little doubt that a lack of electricity capacity has been one of the constraints on GDP growth in recent years, so any postponement is definitely not good news.

“Depending on how long the postponement is, it may delay the projected growth recovery in 2015.”

On Thursday, the Reserve Bank’s monetary policy committee revised growth forecasts for the next two years downwards to 2.9% and 3.2% from 3.1% and 3.4% previously.

Gill Marcus, the bank’s governor, said most of the issues hampering growth were “structural” and reforms set out in the National Development Plan urgently needed to be implemented to achieve higher growth.

Smith said: “The economy is desperately short of power. The sooner new power comes on line, the better for all.

“Conversely, the longer it takes, the more it will constrain short-term growth.

“The extent to which a lack of power will constrain the economy depends largely on the level of demand from the mining and manufacturing sectors, as well as the impact it has on business and investor confidence,” he said.

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