Ingula boost proves Eskom’s drive to solve new build saga

Cape Town – The commercial synchronisation of a second unit at Ingula Pumped Storage Scheme on Tuesday in the space of two months is evidence of Eskom’s push to speed up its new build programme that has been beset by cost and time overruns.

While all four units at Ingula should have been completed in 2013, Eskom is now aiming to beat the new deadlines it set, which would have seen the power station completed in 2017.

Eskom spokesperson Khulu Phasiwe told Fin24 on Tuesday that the power utility had entered into service level agreements with its new build contractors to speed up their new build objectives at Medupi, Kusile and Ingula.

Fin24 reported on Monday that Eskom’s board is facing calls to appear before Parliament with documents relating to the Ingula pumped storage scheme, which has allegedly seen costs spiral from R8.9bn to R36bn.

FULL STORY: Eskom under fire as Ingula costs said to balloon to R36bn

The new cost estimates were revealed by Carte Blanche, who interviewed an insider and a mining expert who worked at Ingula. A source said the underground contractor was paid billions more than should have been the case in bonuses, advances and flimsy compensation events, even as the contractors skimped on safety.

Phasiwe pointed to Eskom’s annual report, which showed that the company incurred R26.8bn for its Ingula project against a budget of R25.9bn.

On July 27, President Jacob Zuma unveiled the first of four turbines at Ingula, which is on the border of KwaZulu-Natal and the Free State. A report broadcast on Carte Blanche on Sunday claims that Zuma's appearance was a rushed pre-elections media stunt.

However, Eskom said the pressure to finish Ingula was a management decision taken when Eskom CEO Brian Molefe took control of the ailing power utility in 2015. “We have to do something,” he said, adding the haste would not be to the detriment of safety. “We can’t stomach any further delays.”

Eskom reported that its cost to completion of Medupi – under construction since 2007 – has increased from R105bn in 2013 to R135bn in 2016 and that of Kusile - under construction since 2008 – has risen from R118.5bn in 2013 to R160bn in 2016.

FULL STORY: Why Medupi and Kusile are Eskom's Achilles heel

“We acknowledge that these power stations should have gone on line a long time ago,” Phasiwe told Fin24. “It’s the reason why we have expedited the programme. We don’t want any further delays.

“The new management says the (new) commercial deadline won’t be deviated (from), unless they are brought forward,” he said.

“Not only are we going to see another unit at Ingula come on line sooner than scheduled, we are also doing the same thing in other power stations,” he said. “Projections are for unit 5 at Medupi to come into commercial operation ahead of schedule.”

TABLE: Eskom's new deadlines for Medupi and Kusile

medupi


Phasiwe said Eskom wants to put itself on a firm financial footing. “We want to start repaying loans and then be on our own (financially),” he said.

Eskom’s new build crisis has been a particular thorn in its foot, especially with regards to convincing energy regulator Nersa to approve tariff increases.

Last week, a court ruled that Nersa must review its decision to allow Eskom to increase prices from April 1.

On March 1, Nersa gave Eskom permission to recoup expenses it hadn’t budgeted for in fiscal 2014 by raising tariffs an average 9.4% starting on April 1, more than the 8% it had initially allowed.

FULL STORY: Court sets aside Eskom tariff hike

Eskom said on Tuesday that the remaining two units of Ingula (units 1 and 3) have also been synchronised to the national grid and are on track for commercial operation within the first half of 2017. Once completed, all four units of Ingula will produce a total of 1 332 MW.

“The commercial operation of Unit 2 will add an extra 333 MW into the national (grid), and this will enable us to ensure security of power supply to South African homes and businesses,” Molefe said in a statement on Tuesday.

“Besides being a catalyst for economic growth, a stable power supply will also enable Eskom, together with municipalities, to roll out electrification programmes to make life easier for millions of households who currently rely on other fuel sources for domestic cooking and heating.”

Eskom said repairs on Ingula’s Unit 3 are progressing well and the unit is expected to come into commercial operation in January 2017 as scheduled.

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