We were on back foot with Medupi from beginning – Eskom

2013-07-09 08:41

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Eskom has been “on the back foot” from the beginning of its Medupi power station project, financial director Paul O’Flaherty has said.

“We take full accountability... We can go back in the history of when this project started, how Eskom was on back foot. We have continued to be on back foot for most of this project,” he said in an interview with SAfm today.

Yesterday, Eskom said in a statement the new power station would probably only begin contributing to the national grid in the second half of next year. The previous target was December this year.

“I think we said from the beginning of the year that we had been highlighting some technical problems with the boiler and the welds and we also highlighted that the control and instrumentation system, at that stage, had failed,” O’Flaherty said.

The boiler problems related to inadequate post-weld heat treatment, and the replacement of welds which were made using unqualified procedures.

This was not the first delay because of welding problems. Previously, faults in factory welds had been discovered.

O’Flaherty said that 9000 welds needed to be tested, as Eskom “would never ever sacrifice safety” and this process had not yet been completed.

The construction delays have been partially blamed on contractor Hitachi’s failure to deliver top quality boilers at the plant.

In May, Public Enterprises Minister Malusi Gigaba said strong measures were taken against Hitachi for its sub-standard work on the Limpopo power station.

O’Flaherty said: “A lot of commentators are saying Eskom must control the contractors better, and that may or may not be true.

“We paid contractors a lot of money to perform and we have not had that done.”

He said Eskom was entitled to recoup some of the funds from contractors.

“We will follow the contracts. The contracts are quite clear in that contractors who cause delays and who cause cost overruns – we are entitled to claim some of those costs back.”

Eskom was busy working out its strategy in this regard.

Asked whether this would be the case for Hitachi, O’Flaherty said he would not be drawn into a commercial debate.

Hitachi Power Africa is 25% owned by the ruling African National Congress’ investment arm, Chancellor House.

“Certainly, we have to look at all of the contractors and they [Hitachi] would be one of them.”

Labour problems have also dogged the construction project, with no work being done on the site between January and April.

In March, Gigaba intervened and said the construction deadline would not change. He said strict penalties would be imposed on contractors should they fail to meet their obligations.

Meanwhile, the Democratic Alliance said yesterday the delay in getting the power station operating comes at an expected 15% price increase, pushing the cost of the project from R91bn to R105bn.

DA MP Natasha Michael said the setback comes at a hefty price to the taxpayers, Fin24 reported.

“The latest delay forecasts a shortfall of power supply in 2014 of 700MW and comes at an expected 15% price increase, pushing the cost of the project from R91bn to R105bn, an additional R10bn to taxpayers,” she said in a statement.

Michael also called on Public Enterprises Minister Malusi Gigaba to take action.

“The minister must now act on his word and make sure some heads roll and face the consequences of poor management at the project.”

She said not having power would negatively affect economic growth and job creation.

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