Eskom ‘can save on power station costs’

Posted On Tuesday, 21 July 2009 02:00 Published by eProp Commercial Property News
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Eskom is confident it can save at least 10% of the costs of building the Medupi and Kusile power stations, chief officer for generation Brian Dames said.

Brian DamesPower utility Eskom is confident it can save at least 10% of the costs of building the Medupi and Kusile power stations, chief officer for generation Brian Dames said yesterday.

Eskom, which is in the middle of a multibillion-rand capacity expansion programme, is facing a shortfall in funding. Now at R27bn, it is set to widen further in the next few years.

The deteriorating global financial conditions have put the organisation in a precarious position, as sources of funding are scarce. The costs of Medupi alone have shot up from about R80bn to R120bn, Dames said.

He attributed the increases to, among other factors, higher interest rates and commodity prices. The utility had entered into some of its contracts at the peak of the commodity boom, Dames said.

It has been speculated whether the utility would put on hold any of its major projects.

Dames said Eskom was committed to press ahead with projects such as the 4 800MW Medupi power station in Lephalale, Limpopo. Eskom’s other major project is the 4 770MW Kusile project in Mpumalanga.

“Eskom has a mandate to go ahead with the projects,” he said.

However, he said, the company would contribute to curtailing the rising costs of its infrastructure programme by making savings of at least 10% on the costs of Medupi and Kusile, two of the biggest projects in Eskom’s programme.

Dames said the utility would achieve the savings through design changes and delayed purchases of some of the components. However, the savings did not include variables over which the utility had no control — such as interest rates and foreign exchange fluctuations.

“The saving is on the targeted project costs,” Dames said.

Eskom head of engineering Matshela Koko yesterday said the utility would also hold discussions with suppliers such as Hitachi and Alstom.

“We have to look at the project scopes and say, how do we achieve the same specifications better.”

One area in which Eskom could save was spare components. “You do not need the spares immediately when the facility is new,” Koko said. Dames said the contractors may have better ideas for savings.

Eskom is part of a team, in which the government is also represented, to develop a funding model for the utility. In its recent application to the National Energy Regulator of SA (Nersa), Eskom said the plan would be ready in September.

Meanwhile, there are strong indications that Eskom could build another coal-fired power station, which would also be located at Lephalale.

Spokesman Fani Zulu said yesterday that on demand growth assumptions, SA would need another station by 2016.

“But a lot of things need to happen before then. For instance, government must decide on the technology. Is it going to be coal? Secondly, who is going to build it? Whoever is going to build it must make an investment decision by December this year.”

He said the need for a new power station in 2016 was based on a 2,9% average demand growth over 25 years. The utility expected no growth in demand this year, but it expected an increase of about 1%-2% next year.


Last modified on Thursday, 31 October 2013 13:11

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