Eskom may risk delays at Medupi to axe Alstom
Utility is considering action over design flaws in control systems
CAPE TOWN — Faced with “fundamental design flaws” in the control systems at the Medupi power station, Eskom is considering replacing French multinational Alstom, despite the risk of further delays and increased costs at its new flagship plant.
The utility indicated yesterday that it was turning the screws on both Alstom and boiler supplier Hitachi Power Africa to ensure that they meet their contractual obligations.
It has already called in Alstom’s performance bond and is considering appointing an alternative supplier for the crucial control instrumentation system and for its boiler protection system if the deficiencies are not rectified.
A decision would be taken within the next few weeks, acting group executive for group capital Dan Marokane told the National Council of Provinces’ select committee on labour and public enterprises yesterday.
Mr Marokane said the control systems installed by Alstom had failed numerous tests due to “errors, omissions and faults in the design”. Further test failures were experienced in late July and early August and defects were discovered. The continued failure of the installation to meet factory acceptance tests had delayed this part of the project by three months.
In the meantime Eskom has commissioned Siemens to undertake an investigatory survey for the replacement of the problematic control and instrumentation systems at a cost of R7.2m. The work commenced on July 31 and was expected to take 10 weeks.
Mr Marokane said Eskom had also initiated the commercial process for a closed enquiry to a selected group of seven local and international suppliers for a full solution for the replacement work. Siemens has offered to undertake the work for about R90m over an estimated seven months.
However, energy analyst Chris Yelland warned that changing contractors midway might lead to possible further delays.
The contract with Alstom might still allow for this replacement, he said, and Eskom could perhaps sue it for damages to cover the costs of the work.
The next few weeks will also be critical for the outcome of negotiations which could see Hitachi having to fork out as much as R700m to restore its performance bond for three units to the 100% level that prevailed before it commenced its share of work on the huge R105bn project.
The performance bond initially amounted to 10% (R2.2bn) of the R22bn contract price, but currently stands at R1.5bn because it declines progressively as work proceeds. Eskom wants to restore the performance bond to its original level so that it has greater leverage to ensure that Hitachi performs according to contract.
Mr Marokane said yesterday that the remaining R1.5bn was insufficient.
There have been major problems with the welding on the boilers supplied by Hitachi, which have contributed to the completion date having to be pushed to the second half of next year.
Eskom’s “total dissatisfaction” with the work led to its attempt to call up R575m under the performance bond in February, but this was blocked when Hitachi obtained a court interdict against the demand.