Utilities Unbundled issue 13

Keeping the lights on

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South Africa needs power and Eskom is on track to deliver, embarking on the biggest capital program seen by the power and utilities sector in decades.

Eskom has embarked on the biggest capital program seen by the power and utilities sector in decades.

South Africa has a widening gap between demand and supply, leading to power shortages power that caused massive blackouts in 2008.

Since then, both the South Africa Government and state-owned utility Eskom, the largest electricity provider in Africa, have worked to increase electric capacity to drive economic growth and create a more equitable social framework.

Capacity to double

The South African Government and Eskom embarked on this massive capital program, including new generation, transmission and distribution capabilities, in 2005.

Results delivered to date include:

  • Two new coal-fired power plants underway – Medupi (first unit operational by end of 2013) and Kusile (first unit operational before end of 2014)
  • One pump water storage scheme – Ingula – underway
  • An extra 4,300km of power lines, with another 2,000km in the works
  • Transmission capacity boosted to approximately 22,000 MVA with 8,000 MVA more under construction (capacity to reach 80,000MW by 2026).

The total budget stands at R385b (US$44.4b) up to 2013, but is expected to top a trillion rand (US$115b) by 2026.

Funding is via government guarantees – Eskom does not have a standalone credit rating – with more than 80% of the money already secured.

Complex challenges

Prish Govender, General Manager, Project Development for Eskom, is leading the program. He says the “huge footprint” of the program makes it inherently complex. Challenges include:

  • Securing the required skills across the EPCM [engineering, procurement and construction management] value chain as well as project management skills
  • Delays in securing the environmental permits required when acquiring land

While ensuring a regular and high-quality coal supply has previously been an issue, Govender is confident this will not be a problem for Eskom’s new plants. “We are partnering with the mines to proactively manage the coal supply,” he says.

Loss of skills and experience

One of Eskom’s biggest challenges is losing the “skills, processes and systems since our last build program in the late 80s, early 90s.”

Eskom is now rebuilding these processes, and standardizing and embedding them across the company. Standardized processes are especially valuable when executing capital projects: “For us, and many utilities dealing with major projects, one of the biggest issues is the ability to prioritize and optimize capital.”

The utility is determined to meet its challenges and keep the program on track. “Our people understand the role Eskom plays in developing the economy and driving growth. And one of the factors that drives South Africa’s growth is our ability to put these assets on the ground as quickly as possible.”

For more information, contact Norman Ndaba.

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