Medupi's fourth unit is ready for commercial operation. But at what cost?

Medupi Power Station. Photo: Wikipedia

Medupi and its sister, Kusile, were touted as the panacea to Eskom’s ageing coal-fired power plant fleet. They were to be the next generation. When ground was broken at Medupi in 2007, it was expected to add 4,788MW to the national grid at a price tag of R69.1bn.

Twelve years on, and with the cost estimated to have doubled, Unit 3 is only the fourth of six to be commissioned. Original timelines for the commissioning of the first unit of Medupi was targeted at late 2012 or early 2013, but the company only managed to switch on this unit in 2015.

In addition, it seems that when the country was plunged into Stage 4 load shedding earlier this year, partly due to seven units tripping – two of these have been attributed to Medupi.

The Mail & Guardian also reported that Medupi tripped 66 times in the 2019 financial year, and Unit 6 was not operational for September, October and November last year.

What went wrong?

According to a report by Dentons, commissioned by Eskom in 2015, limited skills, poor upfront planning, inadequate quality control and labour strikes were key reasons for delays.

A number of preparation processes were fast-tracked or not done at all, such as ensuring it had the necessary skills on board.

“When the decision to proceed with the new build projects was made, Eskom had limited skills to conduct such a project,” said the report.

“Eskom had not developed coal power plants for decades. Experienced power plant staff (mostly operational staff) were moved to the new build programme which left substantial skills gaps at the operating power stations.”

“No proper feasibility study was conducted to ensure that all technical, commercial and environmental hurdles were identified and mitigated. Some of the issues arising during the construction phase should have been identified during the feasibility stage and dealt with prior to construction,” said the report.

The report further said the engineering design prior to the tender phase was not “adequately done, which led to an under estimation of the project costs and inappropriate designs being utilised". The plant had to be retrofitted with flue-gas desulphurisation (FGD) equipment that were not included in official costs to completion estimates. There have also been flaws in the boiler design and filter system.

An independent productivity analysis into the new build projects by an independent consultant also revealed that delays and cost increases were mainly caused by poor upfront planning, poor project integration management and inadequate quality control that led to inferior components.

Other factors that held back the power station builds were supply failures by contractors, work packages that had to be re-done, labour strikes and a lack of funds.

In April, Eskom Chairperson, Jabo Mabuza said questions had been raised on whether it would be feasible to stop construction “We have done the exercise and have concluded that the costs of not continuing is not going to be met by the benefit of continuing,” he said.

Given that they are at a point where they are almost complete… it would cost around R18bn each to complete,” he said.

Mabuza said that should they not complete the projects, it was estimated that an additional cost of more or less R8-billion would be incurred in contractual, legal costs and penalties.

“So if you stop this, then you are going to have to build something else.”

He said this could take between 60 and 66 months.