Chris Yelland: Contractual relations: The story behind Eskom’s Kusile automation contracts

There just doesn’t seem to be an end to Eskom’s troubles. Ever-present in the media, the company’s struggles have left many-a-South-African frustrated and “gatvol”. Constant news updates of rolling blackouts and load-shedding have become rather redundant (I’m sure we’re all used to the load-shedding by now), so it’s always a refreshing read when Eskom isn’t infamously linked to its “too much pressure on the grid” stories. Latest news reveals that SA’s number one provider of power has appointed ABB South Africa to execute a C&I contract at its Kusile power station. Having terminated Kusile’s original C&I contract with Alstom, Eskom had to fork out a grand R40 million to cancel the contract, which has delayed the Kusile project by a year. It would seem that time – and power – are very pressures resources for Eskom. The ABB contract should be a positive step in the right direction – here’s hoping it proves to be both timeous and successful. Read more about this contract in editor Chris Yelland’s article below. – Tracey Ruff

Chris Yelland discusses the new C&I contract Eskom has signed with ABB.

by Chris Yelland, investigative editor, EE Publishers 

On 20 March 2014, Eskom announced the termination, with effect from 17 April 2015, of the approximately €100 (approx. R1-billion) control and instrumentation (C&I) works contract placed with Alstom in 2011 for its 4800 MW Kusile power station, which is currently under construction near eMalahleni (Witbank) in Mpumalanga Province, South Africa.

Shortly thereafter, Eskom announced that it had appointed ABB South Africa to execute the C&I contract at Kusile power station. The ABB contract is valued at about US $160-million (approx. R1,5-billion), and it is understood that ABB will essentially be starting the C&I Works at Kusile from scratch.

In addition to payment for work already completed, Eskom had to pay a cancellation fee of some R40-million to Alstom to achieve a consensual termination agreement on a “co-operative walk-away basis”. The cancellation has delayed the Kusile project by about a year.

Alstom will continue with the C&I Works contract at Eskom’s 4800 MW Medupi site near Lephalale in South Africa’s Limpopo Province, excluding the boiler protection system on Units 5 and 6 which was removed from Alstom’s scope and given to Siemens in 2014.

A preliminary engineering and design process in anticipation of a possible cancellation of the Alstom C&I contract was conducted by Eskom with both ABB and Siemens during the previous year, and both ABB and Siemens subsequently submitted tenders for the new C&I contract.

It is understood that while ABB’s tender was some 25% higher than that of Siemens, ABB offered a six week shorter completion programme for Unit 1 and the “balance of plant”, which ABB is committed to complete by February 2016. Siemens could only commit to April 2016 for this critical stage.

Two independent sources have since indicated that Siemens is considering seeking a court interdict to stop Eskom placing the Kusile C&I contract with ABB.

The Eskom’s acting executive for group capital, Mr. Abram Masango, welcomed the new contract saying: “We believe that the procurement process that we followed will ensure a seamless transition and that it formed a strong basis for a competent supplier to deliver a quality product within agreed timelines”.

ABB is supplying the control and instrumentation system for the entire Kusile plant, including boiler protection and plant simulator, engineering, installation, commissioning, optimisation and training.

ABB South Africa CEO Leon Viljoen says that local software engineering by experienced and qualified local ABB engineers bodes well for South Africa and Eskom. He says further that “ABB is comfortable with its programme to completion for the C&I works at Kusile site, and in view of the political sensitivity of the project, ABB is being careful not to over-promise and under-deliver”.

With six 800 MW super-critical generation units, Kusile will be the fourth largest coal-fired power station in the world and the largest dry-cooled power station in the southern hemisphere. Kusile will be the first coal-fired power station in Africa to use wet flue gas desulphurisation technology in its plant boilers.

Originally scheduled to have all six units fully operational and delivering commercial power into the grid by the end of 2014, the project is running six years late, with massive cost overruns at least twice that originally approved. At present the commercial operation date of the last unit (Unit 6) at Kusile is only scheduled for the end of 2020 at the earliest.

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